Yesterday, Canada was in the headlines thanks to Prime Minister Justin Trudeau’s very public meeting with President Trump, and one cannot talk about Canada without mentioning timber, which has been a staple of the country’s economy since the 1800’s.
The benchmark ETF up north, EWC (iShares MSCI Canada, Expense Ratio 0.49%, $3.5 billion in AUM), has marched higher lately and is presently trading at its highest levels since June of 2015 after spending the very beginning of 2016 in the dumps (EWC had a $17 handle briefly, now trading above $27 today). From a sector standpoint, Basic Materials (which would include Timber) makes up 11% of the overall portfolio within EWC, and is the third largest sector weighting behind Energy (21%) and Financial Services (39%).
Back to timber, WOOD (iShares Global Timber and Forestry, Expense Ratio 0.47%, $221 million in AUM) is the biggest of only two funds that populate this specific niche space, but competing CUT (Guggenheim Timber, Expense Ratio 0.70%, $180 million in AUM) is not terribly far behind in terms of asset size.
Neither fund trades a ton of volume regularly, where WOOD averages about 27,000 shares traded daily versus CUT’s 35,000 shares. Both funds have prospered on Canada’s recent equity market strength, as well as an overall appetite for Materials in general amid the feel that the Trump administration will be pro-growth in terms of the infrastructure space on the whole.
In spite of a small drawdown today, WOOD is trading just off of its 52-week high of $56.50, as is CUT. Canada as a country makes up 10% of the underlying portfolio of WOOD, as the fund has even or larger exposures to Latin America (10%), Japan (11%), Europe (19%), and the U.S. (44%). In contrast, CUT has a much smaller exposure to Canada at only 4%.
When we look at individual holdings within WOOD we see the following: 1) RYN (7.59%) 2) Canadian based WFTBF (7.51%), 3) WY (7.50%), 4) PCH (5.27%), 5) STERV (4.63%), which is a Finland based company. Notably, both WY and PCH are based in the state of Washington, while Canadian based WFTBF is based in Vancouver, Canada, right across the U.S. border of Washington state, highlighting the geographic importance of the Pacific Northwest region to the entire Timber industry.
The iShares S&P Global Timber & Forestry Index (NASDAQ:WOOD) was trading at $56.03 per share on Tuesday afternoon, down $0.11 (-0.20%). Year-to-date, WOOD has gained 4.53%, versus a 4.30% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.