Will the Auto ETF Keep Soaring in 2014? - ETF News And Commentary
26 Dezembro 2013 - 11:00AM
Zacks
After a rough patch, the auto industry is finally showing a steady
pickup in activity. This is largely thanks to improving economic
fundamentals on the labor front, growing demand, an improving car
market, a plethora of new models, and increasing consumer sentiment
(read: Play a Surging Auto Industry with These ETFs).
In fact, U.S. auto sales jumped 9% in November pushing annual
vehicle sales to 16.4 million, buoyed by sales to replace an aging
fleet of cars and trucks. This represents the best month for auto
sales in nearly seven years, suggesting that the industry is on the
right path of delivering strong growth. The promotional offers
during Thanksgiving and Black Friday also gave a huge boost to the
month’s auto sales.
The surge in the auto space can easily be felt as the pure play
First Trust NASDAQ Global Auto ETF (CARZ) surged
nearly 34% this year and easily outpaced the gains of 29.5% for the
broad market fund (SPY). Robust performances from some of the big
automakers like Ford Motor (F), General Motors (GM), Tesla Motors
(TSLA), Toyota (TM) and Honda (HMC) helped the automotive ETF to
soar.
Let’s take a look whether this uptrend will continue in 2014:
Industry Trends Improving
It’s not just the U.S. market which is surging, a number of
international economies are also showing strong car sales. With
rising demand for new cars, Europe is showing strong signs of
recovery.
Emerging markets too are showing strength of late, led by the
double-digit growth in China – the world’s largest car market. All
these developments indicate a bullish trend in the car market
across the globe going forward in 2014.
According to the latest data from IHS automotive, global auto
industry sales would rise to 85 million in 2014 and 100 million by
2018 from the expected 82 million for this year (read: These 3 ETFs
Could Soar on Strong Car Sales).
Auto Stocks in Focus
Among the global auto manufacturers, Ford has been a strong
performer this year with solid gains across all regions, except
Europe. But the company expects a sluggish sales environment in its
European and South American operations in 2014, which could weigh
on its profitability. Additionally, the weak Japanese yen and
increasing cost for product launches added to the woes.
After struggling for several years, General Motors seems back on
track, as it exited the government bailout program earlier in the
month. The U.S. government finally divested its entire stake in the
GM stock, shedding the notorious label of ‘Government Motors’ that
the program gave to the company.
This marks the turning point in the company’s history and the
return of GM to the top spot in the US auto industry (read: End of
General Motors (GM) Bailout May Send These ETFs Higher).
TSLA has seen an incredible run in its share price this year, but
disappointing third quarter results and the recent three Model S
fires seem to have put the brakes in its surge in recent weeks.
On the other hand, the Japanese carmakers – Toyota and Honda – have
bounced back nicely and are clearly benefiting from Prime Minister
Abe’s economic reforms and the Bank of Japan’s efforts (read: Japan
ETFs: One Year After Abenomics).
Though the auto companies have a mixed stance on its future
profitability, investors could bet on this sector and the auto ETF
going forward in 2014 given the positive industry trends and upbeat
auto sales outlook. Further, investors’ shift toward the riskier
corners of the stock market would provide an added advantage to the
fund.
CARZ in Focus
The ETF tracks the NASDAQ OMX Global Auto Index, holding 38 stocks
in the basket. It is highly concentrated in its top 10 holdings
with 61% of assets going to these ten firms, suggesting that
company specific risk is high and the top 10 firms dominate the
returns of the fund. Daimler (DDAIF), Honda and Ford are the top
three holdings with a combined share of 25%.
In terms of country exposure, Japan takes the top spot at 33% while
Germany and the U.S. get a decent allocation with 22% and 20%,
respectively (see: all consumer discretionary ETFs here).
The ETF has amassed $52.1 million in its asset base and sees light
volume. The product charges 70 bps in annual fees from
investors.
CARZ currently has a Zacks ETF Rank of 2 or ‘Buy’ with High risk
outlook, suggesting that the product is expected to outperform the
market in the coming months, especially if some of the positive car
market trends outlined above stay intact.
Want the latest recommendations from Zacks Investment Research?
Today, you can download
7 Best Stocks for the Next 30
Days. Click to get this free report >>
FT-NDQ GL AUTO (CARZ): ETF Research Reports
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
TESLA MOTORS (TSLA): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days. Click
to get this free report
First Trust SNetwork Fut... (NASDAQ:CARZ)
Gráfico Histórico do Ativo
De Jun 2024 até Jul 2024
First Trust SNetwork Fut... (NASDAQ:CARZ)
Gráfico Histórico do Ativo
De Jul 2023 até Jul 2024