Canada’s stock market has a major concentration problem, putting Canadian investors at a big disadvantage
Ryan Irvine | April 11, 2019 | KeyStone Financial: Canadians have a lot of things to be proud of, but the stock market isn’t one of them. This is what it looks like – about $2.3 trillion divided into nine sectors.
It’s not difficult to spot the obvious failing. Two sectors (Financials and Resources) account for over half of the market. Being overly concentrated is risky and this is especially the case when you are overly concentrated in the wrong places. The two sectors that dominate the Canadian stock market are not the ones that I would want to bet on to drive my investment returns.
Financials, while useful, is highly concentrated with only six companies (the big banks) accounting for half the sector’s value. Resources, which are primarily Oil & Gas and Mining, have been a horrible and highly volatile place to invest.
Canada’s stock market has a major concentration problem and this puts Canadian investors at a big disadvantage. But even more disconcerting than where the market is overexposed is where it is underexposed – Technology.
We live in a time of accelerating technological innovation. It is changing the way people live, work and play, and is driving opportunities and efficiencies across nearly every industry. Despite Technology’s crucial importance it is ranked third to last among the nine sectors – only 5% of Canada’s stock market.
This is the reason that Canada’s leading market index, the Toronto Stock Exchange (TSX), has underperformed the rest of the developed world and has, overall, provided meager returns to investors over the last eight years (averaging 4.3% total return per year).
This also means that it’s difficult (and even unadvisable) to invest in the overall Canadian market through vehicles such as indexed mutual funds and ETFs (exchange traded funds) without taking on the risk of these ominous sector weightings.
Fortunately, all is not lost for Canadian investors. There are great companies in Canada; many of which are growing, innovating and expanding their operations well beyond the country’s borders. This makes Canada a stock picker’s market and there is a select group of highly-profitable, growth-oriented businesses that have been producing extraordinary returns and paying dividends through good and bad years.
We can also look to the U.S. market for far better breadth and scope to find exposure to great stocks in game-changing industries such as cybersecurity, big data, machine learning, AI, and the Internet of Things.
In fact, in stark contrast to Canadian markets, the U.S. Tech Sector ranks as the largest market segment, at just under 20% of the market. 
One of the topics at our upcoming Spring 2019 DIY Stock Investment Seminars will center around how Canadians can look to the U.S. market to gain exposure to great businesses operating in cybersecurity, big data, machine learning, AI, and the Internet of Things – which stocks to buy and how many.
In fact, in 2018, we recommended the best performing cybersecurity stock in our U.S. research Fortinet Inc. (NASDAQ:FTNT) after researching over 50 rival U.S. companies. In Canada, the universe of viable cybersecurity stocks is generally in the range of 5. Not really a great selection!
At KeyStone Financial, we believe that an educated investor is a better investor and we have been leveraging our experience and expertise to help educate individuals through our DIY Stock Investment Seminars over the past three years.
We invite you to join the thousands of investors who have already attended one of our seminars and to participate in an upcoming event near you – if we are not already visiting a city near you, ask us to visit your city!
A two-hour investment of your time to take control of your financial future and an opportunity to learn directly from two of the country’s top stock pickers.
Why Should You Attend?
KeyStone not only recommended clients BUY the best performing non-penny stock in Canada this year (2018), XPEL Inc. (TSXV:DAP.U) at US$1.43, which today trades at US$5.00 – a 250% gain, but also repeatedly (over 25 times) recommended clients BUY Boyd Group (TSX:BYD.UN) at $2.30, the best performing stock on the entire TSX over the past 10 years, which trades today in the $148.00 range for a return of over 6,500% (incl. dividends).
In our last round of seminars (October 2018), we recommended Questor Technology Inc. (TSXV:QST), a Cleantech business that designs, manufactures and services high-efficiency waste gas combustion systems for the oil and gas industry. The stock, which then traded at $2.22, has jumped over 120% to just under $5.00 since the buy recommendation. Powering the gains was record financial results for the nine-month period. Earnings doubled to $5.62 million, or $0.21 per share, from $2.8 million, or $0.11 per share, in the first nine-months of 2017.
Each of these are great examples of the type of cash producing, yet unknown businesses we uncover for our clients. In fact, XPEL had no coverage when we recommended the stock. You would not have found this cash producing business recommended by your big bank, your broker or advisor – no other research firm in Canada bothered to even cover XPEL heading into 2018.
Attend one of our upcoming DIY Stock Seminars and learn about five great new growth and dividend growth stocks we think you should buy today. Our analysts will show you how to take control of your portfolio, simplify it to hold 10-20 stocks and pay less fees.
We look forward to seeing you at an upcoming event in a city near you.
KeyStone has Spring 2019 dates set for our next DIY Stock Investment Seminar – Learn How to Create a Simple 10-20 Stock Portfolio.
Special Topics Include
- Are Cannabis, Block Chain, Big Data, AI or Gaming Stocks right for my portfolio?
- Or should I buy cash producing stocks and become a “Boring Millionaire”?
- Learn what stocks to buy (5 recommendations), how many and which to avoid.
Here is the schedule. All events begin at 7 p.m.
Apr. 15 – Kelowna: The Coast Capri Hotel
Apr. 16 – Victoria: The Coast Victoria Hotel
Apr. 17 – Langley: The Sandman Signature Langley Hotel
Apr. 23 – Vancouver: UBC Robson Square
Apr. 24 – Edmonton: The Varscona Hotel on Whyte
Apr. 25 – Calgary: The Coast Plaza Hotel & Conference Centre
May 7 – Kitchener: The Walper Hotel
May 8 – Toronto: The Double Tree by Hilton, Downtown Toronto
May 9 – Oakville: The Hilton Garden Oakville
Basic admission is only $29.95, and all attendees receive KeyStone’s 100+ page Cannabis Stock Report (value $599) plus the Canadian Investor Strategies for U.S. Stock Exposure Seminar Video (value $79). That’s a total value of over $650, just for attending the event.
There’s also a VIP Special for $79.95 that offers more bonuses. Details when you register. Go to https://keystocks.com/diy-stock-investment-seminar/?ref=5&campaign=SCP
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