Lightning McQueen

A trip to Michigan this past weekend sparked my interest to look back at the auto industry.  Despite some of the bad press surrounding the auto makers with respect to recalls, that did not detour buyers in 2014 but instead, gave the industry one its best sales years in recent memory.  A rebounding economy, ultra-low buyer financing costs, a dash of falling gas prices...and auto makers are driving to higher returns.

Luckily for investors, there is a pure play automotive ETF product. The First Trust NASDAQ Global Auto Index Fund (CARZ). The product currently has 36 holdings and includes securities that are classified as automobile manufacturers. In terms of country exposure, Japan, the United States, and Germany account for 79% of the holdings. The ETF hasn’t really garnered as much attention as some of the other transportation products (IYT and XTN, both of which have no auto exposure)

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. 

Tom PsarofagisComment