Automotive exchange-traded funds (ETFs) provide exposure to the performance of companies within the global automobile industry. The auto industry includes companies that manufacture cars, trucks, vans, and commercial vehicles. It also includes companies that supply automobile parts. Well-known names in the industry include Tesla Inc. (TSLA), now the world's largest automaker by market value, and also Ford Motor Co. (F), Toyota Motor Corp. (TM), and General Motors Co. (GM). Auto ETFs are comprised of a basket of automobile equities, enabling investors to profit from the broader growth of the auto industry while avoiding the idiosyncratic risk associated with a single company.
- The auto industry dramatically outperformed the broader market over the past year.
- The best (and only) auto ETF is CARZ.
- Its top three holdings are Tesla Inc., General Motors Co., and Daimler AG.
There is only one distinct auto ETF that trades in the U.S. and which has been in existence long enough to have a 1-year trailing total return. There is a second ETF in this area, the Simplify Volt Pop Culture Disruption ETF (VCAR), which opened in December 2020. However, this ETF has not been in existence long enough to be judged according to Investopedia's metrics, and it has very low assets under management (AUM) as of this writing, meaning that it is a risky investment. The best-performing (and only) auto ETF is the First Trust NASDAQ Global Auto Index Fund (CARZ). CARZ has provided a 1-year trailing total return of 71.9%, dramatically outperforming the S&P 500's total return of 18.7% as of February 5, 2021. We examine this fund below. All numbers below are as of February 8.
- Performance over 1-Year: 71.9%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.56%
- 3-Month Average Daily Volume: 26,876
- Assets Under Management: $69.3 million
- Inception Date: May 9, 2011
- Issuer: First Trust
CARZ tracks the Nasdaq OMX Global Auto Index, a modified market-capitalization weighted index that gauges the performance of the largest and most liquid automobile manufacturers. The ETF provides exposure to large-cap equities in the global auto industry. Given its narrow focus on the highly cyclical auto industry, CARZ is likely to have less appeal within a long-term, buy-and-hold investment strategy. But it may be useful for providing tactical exposure to the auto industry over the short term. The fund follows a value-centric strategy, focusing on what are known as value stocks, which are stocks that look relatively cheap compared to the rest of the sector. Below is a closer look at the ETF's 10 largest holdings.
|First Trust NASDAQ Global Auto Index Fund (CARZ) Top 10 Holdings|
|Company Name (Ticker)||Percent of CARZ Assets||Description of Company|
|Tesla Inc. (TSLA)||9.9%||Electric vehicle manufacturer and clean energy company|
|General Motors Co. (GM)||8.2%||Manufacturer of cars and related parts|
|Daimler AG ( DAI:ETR)||7.9%||Manufacturer of cars, trucks, and vans|
|Toyota Motor Corp. ( 7203:TKS)||7.3%||Manufacturer of cars, trucks, minivans, and commercial vehicles|
|Honda Motor Co. Ltd. ( 7267:TKS)||6.7%||Manufacturer of automobiles, motorcycles, and all-terrain vehicles|
|KIA Motors Corp. ( 000270:KRX)||5.7%||Manufacturer of passenger cars, mini-buses, trucks, commercial vehicles, and auto parts|
|BYD Co. Ltd. (class H shares) ( 1211:HKG)||4.5%||Manufacturer of passenger cars, commercial vehicles, and other automotive products|
|Hyundai Motor Co. ( 005380:KRX)||4.5%||Manufacturer of motor vehicles and related parts|
|Geely Automobile Holdings Ltd. ( 175:HKG)||4.3%||Manufacturer of passenger vehicles|
|Ford Motor Co. (F)||4.2%||Manufacturer of cars, trucks, and related parts|
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