Grab Some Northern Exposure with EWC

Emerging markets are captivating investors again, but tidy profits aren’t always far away. Placing your bets on well-established global markets can also prove rewarding. That’s why we’re looking at Canada.

We’ve previously examined Canada as an energy play. That’s still a worthwhile thesis given that Canada has the second-largest oil reserves in the world behind Saudi Arabia. Canada is much more than energy, though. With roughly the same population as California, our northern neighbor’s economy is diverse. That’s what makes iShares MSCI Canada (EWC) worth exploring.

Hardly a week passes without news of a new country-specific ETF coming to market. You can find new ETFs tracking countries like Poland and Vietnam as well as plenty for developed markets. Maybe that’s why EWC flies under the radar of many U.S. investors. The returns are nothing to ignore: EWC is up 54% year-to-date compared to 26% for the S&P 500. In other words, you could have doubled the return of U.S. stocks by investing internationally without taking the risk of an emerging market.

To be sure, EWC is full of high-quality, familiar names. The top ten holdings all trade on U.S. exchanges. Financials make up nearly 36% of EWC, but Canadian banks didn’t engage in many of the risky practices that imperiled their U.S. peers. Also, since local law makes it nearly impossible for a foreign bank to enter the Canadian market, Canada’s banks are insulated from competition.

Energy and industrial materials make up another 43% of EWC. Canada’s status as a major metals and minerals exporter helps, too. EWC counts Barrick Gold (ABX) and Goldcorp (GG), two of the largest gold miners in the world, among its top holdings. There’s also some tech exposure with Blackberry smart phone maker Research In Motion (RIMM).

The bottom line: if you’re looking for diverse sector exposure with the potential for emerging market returns without the risk, EWC is a compelling option. We like the investing opportunities of our northern neighbor. To go with diversity-rich equities in resource-rich Canada, buy EWC.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.