Editor's Note: This content was originally published on
by The ETF Professor, Benzinga Staff Writer.
Until almost exactly two years ago, one of the obvious absences at
the ETF sector level was a fund devoted to the automobile industry.
For whatever reason, it took nearly two decades of
trading in the US for issuers to get around to introducing funds
tracking an industry that is steeped in history and tradition in
One of the auto ETFs
was shuttered in late 2012
, but the
First Trust NASDAQ Global Auto Index Fund
) is still around. Not only is the First Trust NASDAQ Global Auto
Index Fund still around, but the ETF is, somewhat anonymously,
delivering stellar returns.
Perhaps it is because the former rival to CARZ closed or maybe it
is because CARZ is a small, thinly traded fund. The ETF has just
over $16 million in assets under management and barely more than
9,700 shares per day. Whatever the reasons may be, a lot of
investors are not turning their keys for CARZ. Perhaps they ought
On the back of improving US economic data, such as last Friday's
April jobs report, CARZ has surged nearly 11% this year. In terms
of being a stock replacement for names such as
), CARZ is a fair idea. Ford is the ETF's largest holding with an
allocation of 8.53% while GM occupies the seventh spot with a
weight of almost 7.5%.
), a discretionary play, is the tenth-largest holding with a weight
Overall, the US accounts for 18.53% of the country weight within
CARZ with the aforementioned stocks accounting for the bulk of
that. So the CARZ story could end right here, framing the ETF as a
viable play on a rebounding US economy and everyone could on their
To do that would be to do the ETF and investors a disservice
because CARZ has a potent factor in its favor: An almost 38% weight
(HMC) are the ETF's second- and third-largest holdings,
combining for over 16% of the fund's weight
No, a 38% weight to Japan will not have anyone confusing CARZ with
some of the high-flying
pure-play Japan ETFs
, but that allocation to the world's third-largest economy is
enough to impact returns.
The yen's plunge started in earnest about six months ago when
current Japanese Prime Minister Shinzo Abe announced his candidacy
for the office. Over those six months, the yen has been the
worst-performing developed market currency, which has been good
news for Japanese exporters such as Honda and Toyota.
The yen's tumble has also been good news for CARZ as the ETF is up
30.6% since mid-November. That performance is actually slightly
better than the returns delivered by the
iShares MSCI Japan Index Fund
(NYSEARCA:EWJ) over the same time.
CARZ now trades at all-time highs. Combine that with an almost 31%
gain in six months and upside from here might appear limited, but
that may not be the case. Some Japanese companies have already said
the impact of the weaker yen will be seen on the results they post
later this year.
Additionally, if USD/JPY trades above 100, the expected selling
pressure on the yen at that level will likely send the Japanese
currency falling even further. That scenario could further cement
the status of CARZ as a viable way for investors to make a sector
bet on Japan or enhance the ETF has a complement to a
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