Exchange Traded Funds (ETFs) are considered to be attractive investment vehicles by several investors mainly due to the diversification they offer by providing exposure to a portfolio of stocks or bonds, or currencies, and commodities. Through diversification, ETFs help in reducing the risks associated with investing in a single stock. Let’s look at two Canadian ETFs, iShares S&P/TSX Capped Energy Index ETF (TSE:XEG) and iShares S&P/TSX Capped REIT Index ETF (TSE:XRE), that have a Moderate Buy rating and could offer more than 10% upside, according to analysts.
iShares S&P/TSX Capped Energy Index ETF (TSE:XEG)
The iShares S&P/TSX Capped Energy Index ETF seeks to deliver long-term capital returns by replicating the performance of the S&P/TSX Capped Energy Index. It offers exposure to the companies in the Canadian energy sector. Currently, XEG’s top three holdings are Canadian Natural Resources (TSE:CNQ), Suncor Energy (TSE:SU), and Cenovus Energy (TSE:CVE).
The XEG ETF has $1.49 billion assets under management (AUM). It has an expense ratio of 0.61%. Interestingly, the XEG ETF has risen about 17% year-to-date.
Overall, the XEG ETF has a Moderate Buy consensus rating. Of the 30 stocks held in the portfolio, 22 have Buys and eight have a Hold rating. At C$21.44, the average XEG ETF price target implies 22.3% upside potential.
iShares S&P/TSX Capped REIT Index ETF (TSE:XRE)
The iShares S&P/TSX Capped REIT Index ETF aims to generate capital growth by tracking the performance of the S&P/TSX Capped REIT Index. This ETF offers exposure to retail, residential, office, and industrial Canadian REITs. XRE’s top three holdings are Canadian Apartment REIT ($TSE:CAR.UN), Riocan REIT ($TSE:REI.UN), and Granite Real Estate ($TSE:GRT.UN).
The XRE ETF has $1.36 billion in assets under management (AUM). It has an expense ratio of 0.62%. Interestingly, the XRE ETF has advanced over 7% so far this year.
Overall, the XRE ETF has a Moderate Buy consensus rating. Of the 17 stocks held in the portfolio, 13 have Buys and four have a Hold rating. At C$18.61, the average XRE ETF price target implies 13.5% upside potential.
Conclusion
The XEG and XRE ETFs offer a diversified exposure to energy stocks and REITs, respectively. With analysts suggesting a more than 10% upside potential, these two Canadian ETFs are worth considering.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
