Uncovering the Hidden Gem: The S&P/TSX Completion Index Outperforming the Market

Amidst the impressive performance of the TSX Composite this year, a relatively unknown sub-index has been quietly outshining the market. The S&P/TSX Completion Index, often overlooked, has been delivering notable returns, with a year-to-date gain of 10.51% as of the latest close. In comparison, the leading Capped Energy Index and Capped Materials Index have shown gains of 22.11% and 18.66%, respectively.

The S&P/TSX Completion Index, previously known as the S&P/TSX MidCap Index, encompasses stocks not included in the large-cap S&P/TSX 60 Index. Comprising lesser-known but successful companies such as Fairfax Financial Holdings Ltd., Great-West Lifeco Inc., and Brookfield Renewable Partners LP., along with others like ARC Resources Ltd., TFI International Inc., Stantec Inc., Descartes Systems Group Inc., Ivanhoe Mines Ltd., Lundin Mining Corp., and GFL Environmental Inc., this sub-index offers a diverse set of investment opportunities.

Investors seeking exposure to the mid-cap Canadian stocks represented in the Completion Index can easily do so through the iShares S&P/TSX Completion Index ETF (XMD). With a track record dating back to 2001 and $228 million in assets under management, the XMD ETF has shown consistent performance. It reported a one-year gain of 10.67% as of April 30 and a year-to-date gain of 10.21% by May 23, proving resilient even during challenging market conditions.

In 2022, a year marked by market turmoil, XMD ETF demonstrated its stability by registering a loss of only 4.72%, outperforming traditional benchmarks like the iShares S&P/TSX 60 Index ETF which incurred a 6.36% loss. The portfolio of the XMD ETF comprises 163 positions across various sectors, with materials, energy, industrials, and financials leading the way.

Distributions through the XMD ETF are paid quarterly, with an average of 15 to 16 cents per payout. The trailing 12-month payout stood at 62.571 cents, offering investors a yield of 1.8% based on the recent closing price. With a management expense ratio of 0.6%, the XMD ETF is rated as medium risk, making it an attractive option for those looking to enhance their exposure to mid-cap Canadian stocks through a diversified portfolio.

The S&P/TSX Completion Index remains a hidden gem in the investment landscape, offering investors a chance to capitalize on the success of smaller but promising companies. With its steady performance and lower volatility, the XMD ETF presents a compelling opportunity for investors seeking growth and diversification in their portfolios.