Investors in Canada have long been known for their home bias, favouring local leaders over those from far and wide. This trend is also evident in the recent strong inflows into Canadian equity ETFs, which have already attracted $4 billion year-to-date, according to industry data1.
For investors seeking dividend growth, Canadian equities also offer a compelling opportunity, according to Bank of America strategist Ohsung Kwon, who forecasts a banner year for dividend payers on the TSX.
At the end of the third quarter (Q3 2024), the TSX Composite Index surged 14.5%2, driven by a broad-based rally across Canadian stocks. With a combined market capitalization of $4.2 trillion, the TSX is home to more than 220 companies listed on this Canadian benchmark index. But with so many options in the investing marketplace, how can investors pinpoint the top performers in a product as liquid and transparent as an exchange-traded fund (ETF)?
INTRODUCING GLOBAL X’s BEST OF CANADA ETF SUITE
Global X’s Best of Canada ETF suite is designed to offer targeted exposure to Canada’s largest and most liquid companies across key sectors and subsectors. These strategies represent a first of their kind in our country, with an exclusive focus on the heavyweights that dominate Canadian markets and provide essential products and services to everyday consumers.
With highly concentrated portfolios, the Best of Canada ETFs could be an attractive option for investors looking for a simple, efficient and liquid way to gain access to the country’s economic leaders. This blog gives an overview of three new Canadian funds that are focused on the biggest names in their respective sector:
When we looked at the investment opportunity here, we realized that there wasn’t a strategy that offered Canadian investors a way to easily access major names in their respective businesses here,” says Chris McHaney, Executive Vice President, Head of Investment Management and Strategy at Global X. “That’s why Global X launched its Best of Canada range, to offer the opportunity to potentially match those increased costs at the checkout with investment growth.
GROCERIES
Historically, the Grocery segment has functioned as a defensive subsector that investors favour during periods of uncertainty. After all, everybody needs to eat. Revenue from Canada’s grocery industry in Canada reached $113 billion in 2023. The chart below shows how grocery revenue has grown year-over-year since 2012s as the country has seen growing demographic changes and factors such as higher input costs, Russia’s invasion of Ukraine, and supply chain disruptions contributed to increases in food prices.
Canada’s grocery industry is concentrated into a small group of grocery giants: Loblaws, Empire Company Limited (which operates Sobeys), and Metro—In 2023, Canada’s three largest grocers—Loblaws, Sobeys, and Metro—collectively reported more than $111 billion in sales and earned more than $3.86 billion in profits.3
Controlling approximately 59% of the overall grocery market, at the end of Q3 Loblaws, Empire and Metro stocks were collectively up 80%.4
How can investors potentially gain from Canadian grocery dominance?
MART seeks to replicate the performance of the Mirae Asset Equal Weight Canadian Groceries & Staples Index, an equal-weighted index that provides exposure to the largest Canadian food and staples retail companies.
In addition, MART features Alimentation Couche-Tard Inc. (“Couche-Tard”), Canada’s leading convenience store chain business and among the five-largest chains in the world. Couche-Tard had profits of $2.99 billion in 2023,5 making it one of Canada’s most valuable companies. Recently, Couche-Tard even announced its intention to purchase Japan’s Seven & I Holdings, owner of 7-Eleven, one of the world’s most recognizable convenience store chains, to increase its presence and business potential on a global level.
With MART, investors have an easy way to access these major names in the grocery business. It also provides an opportunity to potentially offset rising grocery and consumer goods costs with growth in their investment portfolios. MART could also be used as a potential inflation hedge as grocery industry profits contribute to rises in food prices, which have been passed on to consumers.
| Name | Ticker | Index Exposure | Exchange | Management Fee* |
| Global X Equal Weight Canadian Groceries & Staples Index ETF | MART | Mirae Asset Equal Weight Canadian Groceries & Staples Index | TSX | 0.25% |
The following grocery and retail companies make up all of the underlying holdings of MART. Here’s a quick look at them:
- Opened its first store in 1919, on Toronto’s Dundas Street West.
- Has more than 2,400 stores and employs 190,000 Canadians across the country.
- For 2023, reported revenue of $59.5 billion and net earnings of $2.09 billion.7
- Alain Bouchard opened his first convenience store in Laval in 1980.
- Today Couche-Tard operates over 2,100 stores across Canada. Globally, the company has a presence in over 30 countries with approximately 149,000 employees worldwide.
- For 2023, reported revenue of $61.12 billion and net earnings of $2.99 billion.9
INSURANCE
Another major Canadian sector concentrated into a small group of major players is the insurance industry. Much like Canada’s Big Six Banks, this sector comprises major life insurers such as Manulife, Great-West Lifeco and Sun Life.
Another member is auto and property insurer Intact Insurance, which has a 19-year streak of dividend payouts.
As a whole (including property, casualty and direct insurance) Canada’s insurance market was worth $77.6 billion last year and overall is the eighth-largest insurance market in the world. The property and casualty insurance business contributes about $38 billion to Canada’s economy and represents approximately 300,000 jobs across the country.
While Canadian banks have been a popular way for Canadians to access financial exposure, the insurance subsector could provide greater opportunity, particularly as these companies have seen stronger growth in recent years. SAFE seeks to replicate the performance of the Mirae Asset Equal Weight Canadian Insurance Index, an equal-weighted index designed to provide exposure to Canada’s largest insurance companies.
| Name | Ticker | Index Exposure | Exchange | Management Fee* |
| Global X Equal Weight Canadian Insurance Index ETF | SAFE | Mirae Asset Equal Weight Canadian Insurance Index | TSX | 0.25% |
Let’s take a quick look at the main Canadian insurers within SAFE:
- Founded in Winnipeg in 1891 by businessman Jeffry Hall Brock as an alternative to competitors from eastern Canada.
- Majority-owned by Montreal-based conglomerate Power Corporation of Canada, the company has approximately 31,000 employees.
- In 2023 reported revenue of $20.4 billion and net profit of $2.74 billion.11
- Founded as the Manufacturers Life Insurance Company in 1887, the company demutualized in 1999, raising $2.5 billion to become the largest Canadian initial public offering (IPO) in history.
- Becomes the second-largest life insurer in North America after a merger with Boston-based John Hancock Financial Services.
- Last year reported revenue of $47.74 billion and net profit of $5.1 billion.12
- Started business as the Sun Mutual Life Insurance Company of Montreal in 1871. The company demutualized in 2000.
- Bought Massachusetts Financial Services (MFS) in 1982. MFS launched the world’s first mutual fund in 1924.
- For 2023, reported net profit of $3.09 billion on revenue of $40.77 billion.13
- Company origins go back to 1809 as the Halifax Fire Insurance Association and was listed as Intact Financial Group on the TSX in 2004.
- Has over 30,000 employees around the world and wrote more than $22 billion of insurance premiums last year.
- For 2023, reported net profit of $1.32 billion on revenue of $22.37 billion.14
TELECOMMUNICATIONS
From the telegraph to the television and the smartphone, the telecommunications (telecoms) sector makes the transmission of ideas and commerce possible. In Canada right now, there are 41 million Canadians who hold 36 million cell phone mobile plans. You’d be hard-pressed to find another industry that has the same product penetration. The retail wireless market is dominated by just three major players: Rogers, Bell and TELUS. Here’s how the telecoms sector contributed to the Canadian economy last year:
The top three telecom companies in Canada hold over 88% of the country’s wireless market share. This is how that market dominance compares to other nations:
Canada has some of the highest costs in the world for data, despite Government intervention to reduce prices for consumers. Amid Canada’s growing population revenues for telcos are up. In 2023, Canada’s three largest telecoms companies—BCE, Rogers, and TELUS—collectively reported more than $64 billion in sales and earned $3.76 billion in profit.15
That said, the high costs associated with developing wireless infrastructure across the world’s second-largest country, along with regulatory barriers for new entrants, likely reinforce the ongoing market dominance of these three companies. Despite record revenues and profitability, the stock prices of Rogers, Bell and Telus were all down at the end of Q3 2024 on a YTD basis. Could this pose a buying opportunity to get exposure to one of Canada’s largest sectors?
Telecoms stocks display interest rate sensitivity due to the industry’s capital-intensive nature and may benefit in a declining rate environment as financing costs go down. Bell, Rogers and Telus are the sole holdings within RING, and seek to replicate the performance of the Mirae Asset Equal Weight Canadian Telecommunications Index, an equal-weighted index of the largest Canadian telecoms companies.
| Name | Ticker | Index Exposure | Exchange | Management Fee* |
| Global X Equal Weight Canadian Telecommunications Index ETF | RING | Mirae Asset Equal Weight Canadian Telecommunications Index | TSX | 0.25% |
Here’s a brief look at the three telecoms giants within RING:
- Formed in 1999 from the merger of Alberta and British Columbia’s provincial phone companies.
- Over 10 million mobile phone subscribers and 106,000 employees.
- In 2023 posted revenue of $20.12 billion and net profit of $0.84 billion.18
With Canadian investors often favouring a home field advantage, Global X’s Best of Canada ETF Suite provides targeted exposure to the largest and most liquid companies across three sectors essential to the Canadian economy – Groceries, Insurance, and Telecoms – offering both stability and growth potential.
For those looking for an opportunity to simplify their investment strategy and access Canada’s market leaders, the Best of Canada ETF Suite offers a focused, efficient option to capitalize on Canada’s top-performing companies.
Related ETFs
MART – Global X Equal Weight Canadian Groceries & Staples Index ETF
SAFE – Global X Equal Weight Canadian Insurance Index ETF
RING – Global X Equal Weight Canadian Telecommunications Index ETF
Sources:
1 RBC Capital Markets – Global ETF Roundup, October 18, 2024.
2 Bloomberg data accessed October 22, 2024.
3 Ibid.
4 Ibid.
5 Ibid.
6 Ibid.
7 Ibid.
8 Ibid.
9 Ibid.
10 Bloomberg data accessed November 1, 2024.
11 Bloomberg data accessed October 22, 2024.
12 Ibid.
13 Ibid.
14 Ibid.
15 Ibid.
16 Ibid.
17 Ibid.
18 Ibid.
DISCLAIMERS
Commissions, management fees and expenses all may be associated with an investment in products (the “Global X Funds”) managed by Global X Investments Canada Inc. The Global X Funds are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Global X Funds. Please read the relevant prospectus before investing.
Mirae Asset Global Index Private Limited (an affiliate of the Manager) owns all rights to the trademark, name and intellectual property associated with the Underlying Indices of the Index ETFs (in this disclaimer, the “Mirae Asset Indices”). No representation is made by Mirae Asset Global Index Private Limited that the Mirae Asset Indices are accurate or complete or that investment in a Mirae Asset Index or an Index ETF will be profitable or suitable for any person. The Mirae Asset Indices are administered and calculated by Mirae Asset Global Index Private Limited and Mirae Asset Global Index Private Limited will have no liability for any error in calculation of the Mirae Asset Indices. Mirae Asset Global Index Private Limited does not guarantee that the Mirae Asset Indices or their underlying methodology is accurate or complete.
Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward-looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase investment products (the “Global X Funds”) managed by Global X Investments Canada Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.
All comments, opinions and views expressed are generally based on information available as of the date of publication and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.
Global X Investments Canada Inc. (“Global X”) is a wholly-owned subsidiary of Mirae Asset Global Investments Co., Ltd. (“Mirae Asset”), the Korea-based asset management entity of Mirae Asset Financial Group. Global X is a corporation existing under the laws of Canada and is the manager, investment manager and trustee of the Global X Funds.
© 2024 Global X Investments Canada Inc. All Rights Reserved.
For more information on Global X Investments Canada Inc. and its suite of ETFs, visit www.GlobalX.ca
Published November 7, 2024.