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CARZ or VROM: Which Is The Better ETF?
It has not been a good year for auto manufacturers trading on U.S.
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Publicly Traded Auto Manufacturers
First Trust Nasdaq Global Auto Index Fund
Up until May 9, investors interested in making an industry-wide bet on the automotive industry couldn't do so without buying a substantial number of stocks on several global exchanges, which for most people isn't financially viable. Fortunately, the good people at First Trust jumped into the breech and gave us just such a vehicle. Highlights of the fund include 37 holdings, a median market cap of $4.7 billion, an expense ratio of 0.7% and total assets of $3.6 million as of October 11, a little more than five months from the day of its launch. As expected given the performance of some of the car companies, its return since inception is negative 24.6% based on net asset value and 24.9% on market price. This compares with negative 17.7% for the MSCI World Index. It's underperformed for sure but what goes up must come down and vice-versa. The car companies will get another day to shine and when they do, you'll look back at your purchases of today and tomorrow with pride. (For more on ETFs in general, read 10 Ways ETFs Can Grow Your Portfolio.)
Global X Auto ETF
Like convenience stores, ETFs seem to pop up in pairs. Exactly nine days after the first automotive ETF launched, Global X Funds, which BlackRock (NYSE:BLK) calls one of the fastest growing ETF providers with $1.5 billion in managed assets, introduced its own version, this time based on the S-Network Automotive Index, as opposed to First Trust's fund, which tracks the Nasdaq OMX Global Auto Index. What's the difference? Not much if you simply look at both funds top 10 holdings. Each has only one that isn't a car company; for Global X that's Johnson Controls (NYSE:JCI) at 4.06% of the portfolio as of October 11, while First Trust's non-car business is Harley Davidson (NYSE:HOG) at 4.04% of its portfolio on October 17. The big difference between the two funds comes after the top 10 holdings. There you'll see that the Global X fund invests in auto parts suppliers and tire companies in addition to the auto manufacturers. First Trust is almost exclusively made of car companies (the exception is Harley Davidson). Beyond what one might normally use to asses ETFs (e.g. fees) investors interested in capturing the car market need to decide if they want the added diversification these additional industries provide.
The Bottom Line
In many respects, the two funds are very similar. In terms of fees, the Global X fund charges 0.65% annually, just 0.05% less than First Trust. Their inception dates are within nine days of each other and First Trust, since inception has outperformed Global X by just over 100 basis points at negative 19.02%. Besides the fact First Trust invests exclusively in moving vehicles, the other big difference is that it makes a bigger play onJapan Germany
At the end of the day, if you're looking for a pure play on the car manufacturers, you have to go for First Trust over Global X. It's that simple. (To learn more, see Analyzing Auto Stocks.)
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Publicly Traded Auto Manufacturers
|
Company |
YTD Return |
|
Tata Motors (NYSE:TTM) |
(37.9%) |
|
General Motors (NYSE:GM) |
(36.4%) |
|
Ford (NYSE:F) |
(30.2%) |
|
Honda Motor (NYSE:HMC) |
(21.9%) |
|
|
(13.8%) |
|
Nissan Motor (OTCBB:NSANY) |
(1.6%) |
|
Tesla (Nasdaq:TSLA) |
2.8% |
Up until May 9, investors interested in making an industry-wide bet on the automotive industry couldn't do so without buying a substantial number of stocks on several global exchanges, which for most people isn't financially viable. Fortunately, the good people at First Trust jumped into the breech and gave us just such a vehicle. Highlights of the fund include 37 holdings, a median market cap of $4.7 billion, an expense ratio of 0.7% and total assets of $3.6 million as of October 11, a little more than five months from the day of its launch. As expected given the performance of some of the car companies, its return since inception is negative 24.6% based on net asset value and 24.9% on market price. This compares with negative 17.7% for the MSCI World Index. It's underperformed for sure but what goes up must come down and vice-versa. The car companies will get another day to shine and when they do, you'll look back at your purchases of today and tomorrow with pride. (For more on ETFs in general, read 10 Ways ETFs Can Grow Your Portfolio.)
Like convenience stores, ETFs seem to pop up in pairs. Exactly nine days after the first automotive ETF launched, Global X Funds, which BlackRock (NYSE:BLK) calls one of the fastest growing ETF providers with $1.5 billion in managed assets, introduced its own version, this time based on the S-Network Automotive Index, as opposed to First Trust's fund, which tracks the Nasdaq OMX Global Auto Index. What's the difference? Not much if you simply look at both funds top 10 holdings. Each has only one that isn't a car company; for Global X that's Johnson Controls (NYSE:JCI) at 4.06% of the portfolio as of October 11, while First Trust's non-car business is Harley Davidson (NYSE:HOG) at 4.04% of its portfolio on October 17. The big difference between the two funds comes after the top 10 holdings. There you'll see that the Global X fund invests in auto parts suppliers and tire companies in addition to the auto manufacturers. First Trust is almost exclusively made of car companies (the exception is Harley Davidson). Beyond what one might normally use to asses ETFs (e.g. fees) investors interested in capturing the car market need to decide if they want the added diversification these additional industries provide.
The Bottom Line
In many respects, the two funds are very similar. In terms of fees, the Global X fund charges 0.65% annually, just 0.05% less than First Trust. Their inception dates are within nine days of each other and First Trust, since inception has outperformed Global X by just over 100 basis points at negative 19.02%. Besides the fact First Trust invests exclusively in moving vehicles, the other big difference is that it makes a bigger play on
At the end of the day, if you're looking for a pure play on the car manufacturers, you have to go for First Trust over Global X. It's that simple. (To learn more, see Analyzing Auto Stocks.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Will Ashworth
Will Ashworth lives and works in Toronto, Canada. He's worked in and around the financial services industry for much of his adult life. He loves investing and is passionate about helping others learn how to put their money to work.
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