Finally Ready To Rock?
Published on Wednesday, 06 June 2012 18:59 Written by Todd Shriber
It has been a tricky couple of months for international stocks. Even Canada, a market that is barely more risky than the U.S., has seen its stock values slide in dramatic fashion. That’s understandable as Canada, despite being a highly advanced developed market, is viewed as a commodities play due to the country’s abundant oil and minerals reserves. Add to that, the recent environment has been quite unkind to small-caps and it’s easy to see why investors have shunned an ETF such as the IndexIQ Canada Small Cap ETF (NYSE: CNDA).
Over the past year, CNDA, the first ETF devoted exclusively to Canadian small-caps, has plunged almost 28% and the past month has been nothing to write home about either. Amid wilting oil prices, CNDA has slid more than 6%, a decline that can be blamed on CNDA’s 28.4% weighting to energy stocks.
All of that makes for a grim prognosis, but CNDA does have a secret weapon and that is a 42% allocation to materials stocks. That may sound like a bad thing in the current market environment, but one needs to consider exactly what CNDA’s materials exposure is: Gold and silver miners, two groups that have roared back to life in recent weeks.
Knowing that, things suddenly look a little better for CNDA as a derivative winner on the back of the Canadian economy being treated as a raw materials play. There’s more good news for investors and it comes in the form of what small-caps make up CNDA’s materials and mining constituents. These aren’t fly-by-night, pump-and-dump penny stocks. These are legitimate companies, some of which U.S. investors may already be familiar with such as AuRico Gold (NYSE: AUQ), NovaGold Resources (NYSE: NG), First Majestic Silver (NYSE: AG) and Silvercorp Metals (NYSE: SVM).
While the iShares MSCI Canada Index Fund (NYSE: EWC) is more liquid and far larger than CNDA, it is the sector breakdown of each fund that matters and to that point, an extended rally in small-cap gold and silver miners could lead to CNDA outperforming its larger rival.
EWC is dominated by financial services stocks with that group accounting for 33.5% of the fund’s weight. Materials do get an allocation of almost 20% in EWC, but that group includes fertilizer producers and predominantly large-cap gold miners. That’s fine, but it is the small-cap miners that have been leading the charge higher.
The bottom line with CNDA is that it will need oil prices and energy stocks to rebound at some point to help extend the life of its rally. In the near-term, however, the fund’s precious metals mining exposure makes it a valid backdoor play into one of the only sectors that’s worth a look from the long side at the moment.
- First Majestic Reports First Quarter Earnings of $26.5 million on Revenues of $67.1 million
- AuRico Gold Reports Voting Results for Election of Directors
- AuRico Reports First Quarter Financial Results
- AuRico Gold Executive Chairman Takes Leave of Absence
- AuRico Gold Announces Details for First Quarter Results Webcast 2013 Annual General Meeting Scheduled for May 13, 2013
- AuRico Gold Announces Preliminary First Quarter Operational Results
- SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders of Silvercorp Metals, Inc., of Upcoming Deadline -- SVM
- AuRico Gold Announces Inaugural Dividend Policy
- Rosen Law Firm Reminds Investors of Important Deadline in Class Action filed by the Firm Against Silvercorp Metals, Inc. -- SVM
- SHAREHOLDER ALERT: Pomerantz Law Firm Reminds Shareholders of Silvercorp Metals, Inc., of Upcoming Deadline - SVM
Related Partner Headlines
- UPDATE: National Bank Financial Downgrades AuRico Gold to Sector Perform on Valuation - Benzinga
- Barrick Gold Corporation and More Big Movers in Gold and Silver on October 12, 2012 - Investopedia
- Earnings Scheduled For October 11, 2012 - Benzinga
- Yamana Gold Inc and Other Big Movers In Gold and Silver on October 10, 2012 - Investopedia
- Parker-Hannifin Among Basic Materials' Biggest Movers on October 10, 2012 - Investopedia
- UPDATE: Canaccord Genuity Upgrades AuRico Gold to Buy on Sale of Ocampo Mine - Benzinga
- Yamana Gold Inc Among Gold and Silver's Biggest Movers on October 5, 2012 - Investopedia
- Yamana Gold Inc and Other Big Movers In Gold and Silver on October 4, 2012 - Investopedia
- AngloGold Ashanti Limited and Other Gold and Silver Stocks Making Big Moves on September 5, 2012 - Investopedia
- BHP Billiton and Other Big Movers In Basic Materials on September 5, 2012 - Investopedia
Latest Partner Headlines
Dow Today: Verizon Communications (VZ) Higher - TheStreet.com
Separating the Bargains From the Busts - TheStreet.com
Cramer Quick Take: The 60-Inch TV Will Be Key This Holiday - TheStreet.com
Cramer Quick Take: Cisco Wins If Fiscal Cliff Is Resolved - TheStreet.com
Gap Up and Sit - TheStreet.com
Apple, Intel, MicroStrategy: Tech Winners & Losers - TheStreet.com
Windows 8 PC Sales Disappointing: Report - TheStreet.com
Cramer Quick Take: Buy Home Depot and Lowe's - TheStreet.com
Dow JonesCompany ID [INDEXDJX:.DJI] Last trade:15,307.17 Trade time:4:44PM EDT Value change:▼80.41 (-0.52%)
S&P 500Company ID [INDEXSP:.INX] Last trade:1,655.35 Trade time:4:43PM EDT Value change:▼13.81 (-0.83%)
NASDAQCompany ID [INDEXNASDAQ:.IXIC] Last trade:3,463.30 Trade time:5:15PM EDT Value change:0.00 (0.00%)
In The Wires
GeckoSystems, an AI Mobile Robot Co., Signs $5M Joint Venture Contract
PantoneLIVE Puts P&G Iconic Brand Colors in the Cloud
Uganda Selects IBM and Waterfund to Benchmark Water Infrastructure
SunPower Announces Pricing of $300 Million Aggregate Principal Amount of its 0.75% Senior Convertible Debentures due 2018
The Coffee World Just Got A Little More Exciting
Dentisoft Technologies Offers Dental Symphony Periodontal App (ePerioCare) Integration for Advanced Periodontal Charting
BCC Research Projects the Flexible Devices Manufactured by Roll-to-Roll Technologies to Reach Nearly $22.7 Billion by 2017
Energy Star Certification Makes Leapfrog Lighting’s PAR30 LEDs Eligible for Rebates and Proves the Durability Claim of the Commercial Quality Lamps