Red Light Ahead For Auto ETF?
Zacks Investment Research | Jul 10, 2014 10:59AM ET
After a bumpy start, U.S. auto sales finally picked up in late March. Thanks to rock bottom interest rates and a gradually improving U.S. economy, the momentum hasn’t slackened since then. U.S. auto sales in June 2014 posted the best annualized figure in eight years.
Beating market expectations, U.S. June auto sales rose 1.2% to 1.4 million units – a month which was tarnished by a slew of safety recalls from automakers. Overall sales increased to a seasonally adjusted annual rate of 16.98 million vehicles from 16.7 million in May. For the first half of the year, auto sales increased 4.3% year over year to 8.2 million units (read: ).
The ETF tracks the Nasdaq OMX Global Auto Index, giving investors exposure to automobile manufacturers across the globe.
The product holds 37 stocks in the basket with General Motors, Toyota and Ford being the top three holdings forming roughly one-fourth of total fund assets. In terms of country exposure, Japan takes the top spot at 35% while the U.S. comes in second with a 24% allocation.
The ETF has amassed $62 million in its asset base and sees light trading volume. The product has returned 4.9% in the year-to-date frame, underperforming the broader markets.
The fund currently has a Zacks ETF Rank #5 or “Strong Sell” with a “High” risk outlook. This suggests that the ETF would continue to underperform and investors would be better off to avoid this product for the time being.
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