Weekly "Focus" and CDRs

Four years ago, another financial acronym was introduced when CIBC launched into the Canadian market CDRs or Canadian Depositary Receipts to allow investors to invest in US companies in C$ on a Canadian stock exchange. The first five were – Alphabet, Amazon, Apple, Netflix, and Tesla – but that list has now grown to over 70 US companies. In addition to the US CDRs, BMO has launched more than 30 CDRs on international companies such as Mercedes-Benz and Nintendo.

 

The investment landscape is full of acronyms – EFT for Electronic Funds Transfer, EPS for Earnings per Share and ROE for Return on Equity. Way back in 1927, ADRs or American Depositary Receipts were introduced by JP Morgan to allow American investors to invest in Selfridge’s, the British retailer, directly on a US stock exchange. Fast forward to today and there are over 2,000 ADRs in companies from over 70 countries (ii).

 

You may be asking what the benefits of CDRs are. Check out the attached summary and this link to a short video: BMO Canadian Depositary Receipts. Two key benefits:

 

1. Allows investors to use C$ to invest in US and International companies where the currency exposure is hedged. The annual hedging cost is less than 1% per year.
2. The price of the CDRs is typically much lower than the share price on the US or International markets. For example, Netflix trades at US$1,283 per share in the US as compared to $49.48 as a fractional share in Canada (i)

 

Our group would be pleased to explain CDRs in more detail – please give us a call if you would like to learn more.

 

This week’s "Focus" from our economics team is attached.

 

Have a great weekend,

 

Brad

Senior Portfolio Manager and Senior Investment Advisor