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Scouring for ETFs that mix growth, value

What are we looking for?

Canadian exchange-traded funds (ETFs) that offer a good mix of growth, valuation and low fees.

How did we do it?

Our friend, Craig McGee, senior consultant at CPMS Morningstar Canada, began by selecting ETFs that focus on the Canadian stock market. These include funds in the following categories: Canadian equity, Canadian dividend and income equity, and Canadian small/mid-cap equity.

Using Morningstar Direct's Scorecard tool, he ranked their holdings on the following six metrics:

average price-to-earnings ratio (for the trailing 12 months);

average price-to-book ratio;

average return on invested capital;

average expected five-year annualized earnings growth rate;

management fee;

one-year total return (for the ETF itself).

His goal was to find baskets of stocks that, on average, offer growth at reasonable prices along with lower management fees and higher overall performance over the past year.

About Morningstar

Morningstar is a leading provider of independent investment research in North America, Europe, Australia and Asia. The company offers an extensive line of products and services for individuals, financial advisers and institutions.

Morningstar provides data on 422,000 investment offerings, including stocks, mutual funds and similar vehicles, along with real-time global market data on more than nine million equities, indexes, futures, options, commodities and precious metals, in addition to foreign exchange and treasury markets.

What we found

Only a few dozen ETFs exist in the categories that were surveyed, so take the results with a grain of salt. However, the funds that stand out on the half-dozen metrics we surveyed could offer decent choices for Canadian exposure as part of a complete portfolio.



(Trailing 12 months)5-yr EarningsManagement1-yr Total
RankNameTickerP/E RatioP/B RatioROICGrowth %Fee %Return %
1FirstAsset Mstar Canada Value ETF CommFXM-T13.84x1.62x7.31%9.86%0.60%31.32%
2FirstAsset Mstar NatlBankQuebec ETF CommQXM-T14.99x2.40x5.72%10.95%0.50%27.26%
3PowerShares FTSE RAFI Canadian Fnd ETFPXC-T14.31x1.62x2.06%8.46%0.45%15.42%
4BMO Canadian Dividend ETFZDV-T15.24x1.63x3.93%8.67%0.35%11.37%
5BMO S&P/TSX Capped Composite Index ETFZCN-T14.81x1.81x3.82%8.84%0.15%8.86%
6iShares S&P/TSX SmallCap IndexXCS-T13.76x1.22x0.22%21.26%0.55%-0.89%
7iShares S&P/TSX Capped Composite IndexXIC-T14.81x1.81x3.83%8.84%0.25%8.72%
8iShares S&P/TSX Completion IndexXMD-T15.00x1.65x3.85%12.49%0.55%5.95%
9FirstAsset Mstar Canada Momentum ETF ComWXM-T15.72x3.21x9.69%9.43%0.60%20.14%
10Horizons S&P/TSX 60 Index ETFHXT-T14.75x1.87x3.82%8.07%0.07%9.87%
11iShares MSCI Canada Min Volatility IndexXMV-T14.63x2.02x6.11%8.17%0.30%8.62%
12iShares S&P/TSX 60 IndexXIU-T14.75x1.87x3.82%8.07%0.15%9.72%
13Vanguard FTSE Canada Index ETFVCE-T15.21x1.80x3.50%8.47%0.09%9.56%
14BMO Low Volatility Canadian Equity ETFZLB-T16.17x2.28x5.88%8.36%0.35%21.36%
15iShares CAN Fndmental Idx CommonCRQ-T14.31x1.62x2.05%8.46%0.65%15.24%
16iShares Jantzi Social IndexXEN-T14.04x1.93x5.11%7.35%0.50%13.83%
17iShares S&P/TSX Can Div Aristocrats CommCDZ-T15.77x1.84x7.42%8.32%0.60%10.23%
18iShares S&P/TSX Equity Income Index FundXEI-T13.35x1.69x2.62%6.37%0.55%12.06%
19Horizons S&P/TSX 60 Equal Weight ETFHEW-T16.06x1.69x3.51%9.03%0.50%7.48%
20iShares DJ Canada Select Growth IndexXCG-T18.80x2.40x7.63%11.07%0.50%-0.77%
Source: Morningstar Direct

© 2007 The Globe and Mail. All rights reserved.

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