Pass on this ETF

Article Excerpt

ISHARES S&P/TSX SMALL CAP ETF $16 (Toronto symbol XCS; TSINetwork ETF Rating: Aggressive; Market cap: $121.1 million) invests in smaller listed Canadian companies. The ETF holds 197 stocks, with the top 10 comprising only 13% of its assets. This gives it the appearance of a well-diversified portfolio, but closer scrutiny reveals a heavy concentration in resource stocks. Specifically, mining and forestry stocks make up 26% of holdings while oil and gas companies add another 24%. Top company holdings include Labrador Iron Ore, NuVista Energy, Secure Energy Services, CES Energy Solutions, Gran Tierra Energy, Precision Drilling and Enerflex. We like some of the stocks this ETF holds. For example, we cover Precision Drilling in our Successful Investor newsletter and Enerflex in Stock Pickers Digest. However, the Manufacturing and Resources sectors generally expose investors to aboveaverage risk; the Canadian Finance and Utilities sectors generally involve below-average risk, and the Consumer sector falls somewhere in the middle. Small-cap stocks are always more volatile— and combining that volatility with…