Trading Canadian-Listed Companies
Monday, July 30th, 2007
By George Leong, B.Comm. for Profit Confidential
The NASDAQ and the DOW are up about 11% this year, but if you invested all of your capital in U.S.-listed stocks, you missed out on some excellent gains as well as the opportunity to diversify geographically and reduce some exposure to the soft U.S. dollar, which is at lows versus the Euro and a two-decade low against the Canadian dollar.
Emerging markets have seen excellent returns, but the risk there is also much higher than U.S. markets. If you are somewhat cautious about investing in overseas markets, you only had to look to Canada, where markets have not only performed better than U.S. markets but you also gain via the strong commodity-based Canadian dollar.
The benchmark Toronto Stock Exchange’s S&P/TSX composite index recently traded at a historical high of 14,646.80 and is currently up just over 12% this year. A strong weighting in commodity stocks, such as energy, gold, and base metals, accounting for about 40% of the index, has driven up the S&P/TSX composite index.
If you are positive on commodities going forward like I am, this Canadian index might be worth a look. And unlike emerging markets, financial reporting in Canada is very good and follows GAAP.
When you trade Canadian-listed companies on the S&P/TSX composite index, you can rest assured that the numbers you are seeing represent a realistic picture of the company. Moreover, the political system is sound, the financial infrastructure is highly regulated, and the economy is doing well.
In addition to the share price appreciation, investing in Canadian stocks or an index also gives you exposure to a currency that has risen over 50% against the U.S. dollar. You can also trade some Canadian stocks listed on U.S. exchanges.
If you are looking for more growth and added risk, you can also buy or trade the S&P/TSX SmallCap Index or S&P/TSX MidCap Index. For blue-chip stocks, there is the S&P/TSX 60 Index; and for emerging and speculative issues, look at the S&P/TSX Venture Composite Index.
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Tags: small-cap stocks, stock market, U.S. dollar
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George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
