Capture the American Advantage: Why Canadian Investors Shouldn’t Ignore the U.S. Market

Are you interested in building the best portfolio? Here’s why you should include U.S. stocks if you want to achieve success in the stock market.

The Canadian stock market offers investors a plethora of outstanding companies. From the utility sector to the tech sector to the banking sector, investors can find stocks worthy of finding a home in their portfolio. However, despite the large number of impressive stocks that trade in Canada, I think it’s a good idea for investors to consider buying shares of stocks that trade in the United States. In this article, I’ll discuss three examples.

This is one of my favourite stocks

Sea Limited (NYSE: SE) is one of my favourite stocks in the world. This company operates in three very intriguing industries. Those include esports (through Garena), e-commerce (through Shopee), and digital banking (through SeaMoney). In my opinion, Shopee is the most attractive business segment, of those three, and should be the driving force behind Sea Limited stock over the coming years.

In its first-quarter (Q1) 2023 earnings presentation, Sea Limited reported US$2.1 billion in revenue. That represents a 36.3% year-over-year increase. Unfortunately, those results haven’t been enough to sway investors this year. Sea Limited stock has continued to be very volatile, experiencing many short periods of highs and lows. Year to date, the stock has risen about 24%. I believe it will continue to be a volatile ride over the next few years, but, overall, I think the stock should trend upwards.

If you’re looking for performance, look no further

When it comes to American stocks, very few companies are as prolific as Amazon (NASDAQ: AMZN). Since its initial public offering, Amazon stock has gained an astonishing 140,600%! Needless to say, if you’ve held shares of this stock since before 2000, you’ll be very happy today. Through the power of its marketplace, cloud services, and other ventures, Amazon has managed to establish itself as one of the largest companies in the U.S. (by market cap).

For a while, this stock may have been difficult to buy for many retail investors. However, with a 20-to-1 stock split occurring last year, investors now have no reason not to buy this stock. Over the past year, Amazon stock has gained about 24%. I think that AWS and Amazon’s marketplace could continue to push the stock to new heights over the next decade.

Invest in a basket of U.S. companies

Finally, if you’re hesitant to invest in individual stocks across the border, I think there’s still value in holding American exchange-traded funds (ETFs). Vanguard S&P 500 Index ETF (TSX: VFV) in particular is one that I think all Canadians should consider holding in their portfolio. By investing in this ETF, investors would be able to gain exposure to more than 500 American companies. That includes the likes of Microsoft, Apple, Mastercard, and many more.

Although it’s had its share of volatile times, the S&P 500 has gained more than 57% over the past five years. That compares to the S&P/TSX, which has gained 22% over the same period. If you’re interested in a way to generate more stable returns over time, then holding an ETF that tracks the S&P 500 could be a great decision.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Jed Lloren has positions in Apple, Microsoft, and Sea Limited. The Motley Fool recommends Amazon.com, Apple, Mastercard, Microsoft, and Sea Limited. The Motley Fool has a disclosure policy.

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