One American fund manager said he’s “shocked” more international investment firms aren’t putting their money to work in Canadian stocks, considering their value relative to U.S. equities.

“I'm shocked that hedge funds aren’t crawling across the border and, you know, becoming an activist in some of these stocks because people are getting wealthy and no one's paying attention,” said Cole Smead, president and portfolio manager of Arizona-based Smead Capital Management, in an interview on Wednesday.

“Canada is cheap. Canada is cheap relative to the United States. It's a commodity-oriented market in so many ways - and this is a great commodity era.”

Smead said he’s bought into Canadian oil and lumber stocks including Cenovus Energy Inc, MEG Energy Corp. and West Fraser Timber Co. Ltd.

A recent boom in commodity prices has helped lift Canadian resource stocks, which now have roughly the same weighting on the Toronto Stock Exchange as the financial subgroup. Historically, financials have dominated the TSX in terms of being the heaviest-weighted subsector.

A Commodity Markets Outlook report from the World Bank on Tuesday said it expects energy prices to rise further because the conflict between Russia and Ukraine could potentially persist into 2024 and continue to aggravate global supply chains. 

Cenovus is the latest Canadian energy firm to show how higher energy prices are feeding through to its bottom line. The oil producer’s first-quarter profit soared to $1.6 billion, compared with a $220 million profit in the same time last year. It also tripled its quarterly dividend to 42-cents per share.

Smead said he thinks major institutional investors haven’t taken full notice of Canadian stocks yet because their investments need “to get slaughtered in the United States markets first, and then they'll be like a wounded dog trying to go look for something else to lick on.”

“The psychology is not there yet,” he added. “When commodities are understood to be a boom and one of the greater inflation protections out there globally, that's when people will be absolutely ecstatic to touch Canadian markets. And like I said, in the pendulum swing, we're not there yet.”