Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Five Ways to Profit From the World's Safest Economy

Stock-Markets / Canadian Stock Market Sep 10, 2010 - 07:20 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleMartin Hutchinson writes: I've said it once, and I'll doubtless say it a few dozen more times before the U.S. economy returns to health: Just because you have to endure recessionary conditions doesn't mean that your money has to.

That's the argument I make when I urge Americans to search for investments outside U.S. borders. Ironically, your money doesn't have to travel all that far: What's arguably the world's "safest economy" is actually located just north of the border.


I'm talking, of course, about investing in Canada.

The United States vs. Canada
With the U.S. economy dragging along huge budget deficits and stuck in low gear, it's time to escape these problems by moving money away from this market.

I have written many times about the importance of escaping U.S. problems by investing abroad. But for those who don't wish to wade through Korean financial statements or Peruvian mining statistics, Canada represents a simple alternative.

In fact, it really has a lot in common with its neighbour just to the south - except for two major differences:

•Canada's economy is backed by a rich cache of oil, gold and other in-demand natural resources.
•And Canada's leaders didn't permit the outgrowth of an avaricious and out-of-control financial sector that then had to be bailed out with a series of budget-busting bailout/stimulus packages.
The annualized second-quarter-growth rate of 2.0% in Canada didn't much beat the 1.6% advance of its U.S. counterpart. But Canada's final demand growth - at 3.2% - was more than triple the tepid 1.0% move reported for the U.S. economy.

That's an indication that Canada's economy, though weighed down partly by its neighbor's weakness, is recovering more robustly.

As noted, Canada's banking system is more tightly regulated than its U.S. counterpart, so it indulged itself much less intently in the subprime-mortgage and financial-derivatives shenanigans that brought the U.S. system down. That means that the Canadian housing and mortgage markets are in better shape than those of the United States, because there are fewer foreclosures.

Canada's government was less self-indulgent in "fiscal stimulus" at the bottom of the recession, so its 2010 budget deficit projected by The Economist panel of forecasters is only 4.5% of gross domestic product (GDP) compared with 8.9% of GDP in the United States.

Canada's current account deficit, forecast by The Economist panel at 1.8% of GDP, is little more than half the projected U.S. deficit.

It doesn't hurt either that the Bank of Canada, instead of trying to figure out ways of lowering interest rates below zero, has begun to raise them instead; a 1% short-term rate doesn't encourage savings much, but it sure beats the U.S. target rate, which has been at 0.00% to 0.25% since December 2008.

As well as being better balanced fiscally and monetarily than the U.S. economy, the Canadian economy has a relatively larger resources sector, a big advantage when energy and commodity prices are being propelled higher by Asian demand.

Profit Plays North of the Border
There are a number of possible approaches to investing in Canada. One is to buy the market as a whole, investing in the Canadian market exchange-traded fund, the iShare MSCI Canada Index ETF (NYSE: EWC). This ETF has a Price/Earnings (P/E) ratio of 14 and a dividend yield of 1.6%, so the Canadian market overall is reasonably priced.

Back in October 2008, during the worst of the financial crisis, the World Economic Forum rated Canada's banking system as the safest in the world.

So it makes sense that a second possible approach is to buy one of the five large Canadian banks, where - because of better regulation - Canada has a clear competitive advantage over the United States. Of these five, I like the Toronto-Dominion Bank (NYSE: TD) the best. Toronto-Dominion shares are trading at 14 times earnings, with a nice dividend yield of 3.3%. Its Price/Book Value (P/BV) ratio is a reasonable 1.8, while its P/E actually drops to 10.6 on projected 2011 earnings.

Betting on the entire Canadian economy is a good bet, and will likely pay off nicely. The same is true of Canada's strongest banks. But if you really want to play to Canada's strengths - while also riding the most powerful long-term growth opportunities available to global investors today - then commodities and natural resources are the Canadian investment plays to make.

For a detailed rundown on those investments, check out the "Actions to Take" section below.

Actions to Take: if you really want to play to Canada's strengths - while also riding the most powerful long-term growth opportunities available to global investors today - then commodities and natural resources are clearly the Canadian investment plays to make.

One resource whose importance is escalating is uranium, chiefly because of rising demand from reactor programs in China and elsewhere. As you know, one economical approach to battle global warming is to build more nuclear reactors, and those will require uranium to operate - thus the price of uranium is likely to be strong.
While Australia's reserves of uranium are double those of Canada, Canada still has 9% of the world's known uranium reserves, meaning it will be a major producer for decades to come.

Indeed the world's largest uranium mine is the McArthur River mine, operated by Cameco Corp. (NYSE: CCJ), Canada's largest producer. Cameco shares are currently trading at 10.8 times trailing earnings, so it is reasonably valued, given the upside potential.

Canada's most important strategic relationship with the United States is in the supply of energy, both from conventional oil and gas and from the Athabasca tar sands deposits in Alberta.

Of the Canadian oil plays, I most favor Suncor Energy Inc. (NYSE: SU) because of its position as the most important producer of tar sands oil. This is only modestly profitable at current oil prices. But if prices run up, or if a global crisis restricts supplies, Suncor's tar-sands holdings can be expected to increase hugely in profitability. Suncor shares were recently trading at 19 times trailing earnings, but only 13 times expected 2011 earnings.

Finally, in Canada's very important minerals sector, I like Teck Resources Ltd. (NYSE: TCK), which is a major producer of coal, copper and other metals. And that's not all: Teck Resources has the Chinese government's China Investment Corp. sovereign wealth fund as a strategic 17% shareholder (one of CIC's few really profitable deals, up more than 100% since it bought in close to the bottom of the market).

Teck is trading at a remarkably reasonable 10.4 times earnings, and is due to benefit further from the inexorable rise in copper prices, and from completion of coal infrastructure enabling it to ship efficiently to the Chinese market from Canada's West Coast.

Through holding these or similar Canadian shares, you can diversify from the US economy, taking advantage of Canada's remarkable mineral and energy resources and its superior banking system. Truly, this trip north of the border - into what is arguably the world's safest economy, is well worthwhile.

[Editor's Note: Why is it that Money Morning's Martin Hutchinson has been right on the money with every one of his political predictions for each of the last three years?

The answer is quite simple. The same skills that made him a successful global merchant banker - where he was easily able to identify winning trends for his clients - also make him one of the very best political prognosticators.

Just look at some of his most recent global predictions. Earlier this year, just a week after Hutchinson recommended Germany, the European keystone reported much stronger-than-expected GDP. He recommended Chile back in December, and three of the stocks he highlighted have posted strong, double-digit returns - and one is up nearly 25%. He again recommended Korea - which analysts were downgrading - only to have the traditionally conservative International Monetary Fund (IMF) come out with an upgraded forecast that projects solid growth for that Asian Tiger for this year and next.

A longtime international merchant banker, Hutchinson has a nose for profits instincts - as evidenced by his unerring ability to paint a picture of what's to come. He's able to show investors the big profit opportunities that are still over the horizon - while also warning us about the potentially ruinous pitfalls hidden just around the corner.

With his "Alpha Bulldog" investing strategy - the crux of his Permanent Wealth Investor advisory service - Hutchinson puts those global-investing instincts to good use. He's managed to combine dividends, gold and growth into a winning, but low-risk formula that has developed eye-popping returns for subscribers.

Take a moment to find out more about "Alpha-Bulldog" stocks and The Permanent Wealth Investor by just clicking here. You'll find the time well spent.]

Source : http://moneymorning.com/2010/09/10/investing-in-canada-2/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in