An ETF for strong auto sales data

There is only 1 exchange-traded fund focusing exclusively on car companies.

By Benzinga Jun 5, 2014 11:54AM

Image: Car salesman showing couple new silver hatchback in car showroom © Juice Images/Cultura/Getty ImagesBy David Fabian


Automobile manufacturers released their May sales results this week, and initial readings show strong demand for domestic vehicles.


Chrysler Group reported a 17 percent jump in May, General Motors (GM) posted sales growth of 13 percent and even Ford (F) managed to eke out a 3 percent gain from a year ago.


Many of these sales totals represent the auto industry's best month in years, as fuel-efficient models and an attractive interest rate environment fuel consumer spending habits.


While there are certainly many investment opportunities with individual publicly traded auto manufacturers, picking the right stock may be fraught with risks. Fortunately, there is an ETF that gives investors exposure to a global basket of equities with built in diversification qualities.


The First Trust NASDAQ Global Auto Index Fund (CARZ) is currently the only dedicated ETF that focuses exclusively on car companies.


This market-cap weighted strategy contains 38 holdings in familiar names such as Ford, Toyota (TM) and Honda (HMC). In addition, CARZ contains motorcycle brand Harley-Davidson (HOG).


CARZ currently has $60 million in total assets and charges an expense ratio of 0.70 percent. This ETF has fallen somewhat flat year to date with a total gain of just 1.06 percent.


However, that return still bests the 1.34 percent loss that the Consumer Discretionary Select Sector SPDR (XLY) has posted. XLY represents a larger swath of domestic consumer goods and services companies. Auto manufacturers currently make up just over 6 percent of the industry weighting within XLY.


If the current sales trend continues, it may bode well for additional growth opportunities in CARZ moving forward. However, the rash of recent recalls across multiple brands will need to be resolved in order to assure customers that safety concerns are being met.


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