I am retired and take educated guesses on all things financial.

November 05, 2006

November 6, 2006: Canada income trusts and interesting ETFs

It was announced this past week that the Canadian government will be taxing the many so-called Income Trusts that up until now had received tax-free status. The tax will be phased in over four years, but has understandably caused quite a stir in the Canadian markets from the moment the government decision was announced. To those of us that see government promises as unreliable at best, this decision came as no surprise. In times of distress there comes opportunity. I recommend all Canadian banks and life insurance companies who will benefit from a huge inflow of investment cash bailing out of income trusts. My favorite remains the Bank of Nova Scotia (BNS). Trading north of 45.00/share, I believe it will reach the mid 50s over the next six months, and proceed at a measured pace upward from there. A great long term investment.

I have invested in several relatively new ETFs (see previous posts), but not the following. Those discussed below have some interesting prospects for diversification into more eclectic areas.
I do not recommend these funds at this time. They are interesting to review for inclusion at some future date once a track record is established.

Power Shares has two recent additions: The Dynamic MagniQuant Portfolio (PIQ), which is tracking the Intellidex proprietary filters to produce the 200 stocks with the greatest potential for appreciation. Trading at 25.25 the top holdings are JLG Industries, Continental Airlines,OM Group,Nordstrom and Freescale Semiconductor. No stock or small group of stocks hold a commanding percentage of the portfolio. The Listed Private Equity Portfolio (PSP) will attempt to replicate the Red Rocks index of firms doing successful private equity placement and/or funding. The top holdings are American Capital Strategies, Leucadia National, SVB Financial, Capital Source and Allied Capital (KKR comes in sixth place). This will be an interesting play on the more mundane aspects of the private equity game. I view this as a very volatile fund due to likely government regulatory acts in the near

Claymore has one fund that fits today's list: The Claymore Sabrient Insider ETF (NFO) will attempt to track the Sabrient list of stocks with pin action defined by insider transactions. The top five holdings are NatGear, Consolidated Energy, Sunpower Corp., Natco and Rackable Systems. I think this fund is extremely speculative. I was "racking" my brain trying to remember if I had even heard of many of the companies on this Sabrient brainchild.

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