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.
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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.
