The auto industry is enjoying improved fundamentals from an expanding economy. Easy car loans have been aiding growth in car sales, low interest rates have cut financing costs for all buyers and the rising employment rate, with employers adding new workers last year at the fastest pace since 1999, is supporting consumer confidence.
All of that is good news for the often-overlooked First Trust NASDAQ Global Auto Index Fund (NasdaqGM: CARZ), which is the lone dedicated auto industry exchange traded fund, is up 8.5% year-to-date and nearly all of those gains have been accrued in February. [Auto ETF Gains Momentum]
“February is expected to mark the 12th consecutive month of year-over-year gains for the industry. Analysts said sales have been minimally affected by rising gasoline prices and a work stoppage at West Coast ports that could reduce March inventories of some vehicles imported from Asia,” reports Nick Bunkley for Automotive News.
The February sales data, which includes sales on March 1 and March 2, will be reported on March 3. It is possible that U.S. auto sales could hit 15 million units this year, meaning this could be the best auto sales year since 2001.
The $32.4 million, which celebrates its fourth anniversary in May, is not a currency hedged ETF, but there is no doubt the fund is benefiting from weaker currencies in some of its largest country allocations. For example, is the largest country weight in CARZ at 35.7%, or 1,240 basis points larger than the ETF’s allocation to U.S. automakers.
Honda (NYSE: HMC), Toyota (NYSE: TM) and Nissan combine for 21.3% of the CARZ lineup. The ETF is also significantly levered to the weakening euro with a weight of almost 21% to Germany. Export-driven Germany, the Eurozone’s largest economy, has been highlighted as a prime beneficiary of the euro’s slide. Daimler, BMW, Volkswagen and Porsche Automobil are all top 10 holdings in CARZ. [Hedged Germany ETFs Love ECB QE]
“After and explosive 37% year in 2013, CARZ was rather stagnant in 2014, barely changed on the year. Following the brief broader market correction in October of 2014, CARZ has since rallied 18% and is vast approaching the all-time high level from summer of 2014. The ETF has been trading in a narrow consolidation range between $36-41. The all-time high of $41.36 is a significant resistance level ahead, but it could be pedal to the medal with a meaningful breakout above that,” said Tom Psarofagis of Agd Capital Management in a post published earlier this week.
First Trust NASDAQ Global Auto Index Fund
ETF Trends editorial team contributed to this article.