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
trading in the U.S. for issuers to get around to introducing
funds tracking an industry that is steeped in history and
tradition in this country.
One of the auto ETFs
was shuttered in late 2012
, but the First Trust NASDAQ Global Auto Index Fund (NASDAQ:
) 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 U.S. economic data, such as last
Friday's April jobs report, CARZ has surged nearly 11 percent
this year. In terms of being a stock replacement for names such
as Ford (NYSE:
) or General Motors (NYSE:
), CARZ is a fair idea. Ford is the ETF's largest holding with an
allocation of 8.53 percent while GM occupies the seventh spot
with a weight of almost 7.5 percent. Harley Davidson (NYSE:
), a discretionary play, is the tenth-largest holding with a
weight of four percent.
Overall, the U.S. accounts for 18.53 percent 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 U.S. economy and
everyone could on their way.
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
percent weight to Japan. Toyota (NYSE:
) and Honda (NYSE:
) are the ETF's second- and third-largest holdings, respectively,
combining for over 16 percent of the fund's
No, a 38 percent 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 percent since mid-November. That performance is
actually slightly better than the returns delivered by the
iShares MSCI Japan Index Fund (NYSE:
) over the same time.
CARZ now trades at all-time highs. Combine that with an almost
31 percent 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 Japan-specific fund.
For more on ETFs, click
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