Opinions
John Hood
First Asset Can Materials ETF
MXF-T
DON'T BUY
Jul 05, 2013
$4.610
Stock price when the opinion was issued
E.T.F.'s
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COMMENT
Canadian Materials ETF. It is 70% gold equities. They earn a dividend but MXF-T writes covered calls on 25% of their holdings and then pays a distribution. It has gone down with the overall market and then broke its trend to move sideways. If you expect the sector to do okay this is a good way to get exposure to this. Covered calls work well when there is slow growth in the stocks it holds.
E.T.F.'s
Dividend yield is quite high at about 16.5% and this just emphasizes the issue of don’t trust yield. This ETF is based on materials, which is basically gold stocks and potash. A lot of the golds are paying dividends and Calls are being written on them, but the price has collapsed. Doesn’t make any sense to be up 14% on a dividend, but down 25% on the underlying securities.