The auto industry has been a mixed bag over the past five years, and it is hard to predict with any certainty which direction it will go over the next five. Donald Trump's surprise presidential win may have some unexpected impact, especially if his policies concerning trade and job outsourcing come to fruition. After all, labor makes up a significant portion of the cost of a car. (See also: 4 Ways Outsourcing Damages Industry.)
Then again, Trump probably cannot change the steady growth in manufacturing production automation, which will mitigate higher labor costs. And there are other factors – such as oil and gas production, commodities prices, carbon taxes and overall tax policy – that make prognostication difficult for even the most skilled market watchers. (See also: What Financial Advisors Think of Donald Trump.)
Take a look at these top auto industry ETFs. Some strictly track the auto industry, while others include other sectors but still have a high percentage of auto companies – so you can match it to your risk tolerance. (See also: What Is the Difference Between Risk Tolerance and Risk Capacity.)
All year-to-date (YTD) performance figures are based on the period of Jan. 1, 2017, through Nov. 6, 2017. Funds were chosen on the basis of both assets under management and performance. All figures are current as of Nov. 6, 2017.
- Issuer: First Trust
- Assets Under Management: $21.0 million
- YTD Performance: 22.25%
- Expense Ratio: 0.70%
This is a true auto industry ETF, tracking the Nasdaq OMX Global Auto Index, which includes only companies classified as car manufacturers. The Index is based on market capitalization. Companies in the Index must have a market cap of at least $500 million and an average trading volume of at least $1 million over a three-month period. As the name suggests, it is a global index, and there are cap restrictions in place to prevent dominance by one or two companies. There are currently 34 equities in the fund's holdings.
At 70 basis points in annual fees, CARZ is a bit pricey, but it does have a singular focus on the auto industry. The ETF is up 28.80% over the past year. Three-year and five-year returns were 13.26% and 67.31%, respectively. (See also: Is the Auto ETF Headed for a Trump Bump or Slump?)
- Issuer: Invesco
- Assets Under Management: $24.1 million
- YTD Performance: 25.51%
- Expense Ratio: 0.30%
Some of the major auto players are in Asia right now, and if you want exposure to these industry titans, as well as some of the most actively traded large-cap companies on the Asian market, this might be the fund for you. ADRA tracks the BNY Mellon Asia 50 ADR Index, which includes companies with a market cap of $2 billion to $175 billion. The Index is rebalanced quarterly.
Toyota Motor Corporation (TM) and Mitsubishi (MTU) are among the fund's top five holdings, while Honda Motor Co., Ltd. (HMC) comes in eighth place. In total, automobile companies comprise more than 17% of ADRA's assets. One-year, three-year and five-year returns are 25.69%, 14.11% and 44.75%, respectively. (See also: The Industry Handbook: Automobiles.)
- Issuer: iShares
- Assets Under Management: $204.1 million
- YTD Performance: 16.26%
- Expense Ratio: 0.48%
Investors seeking auto industry investments will also find exposure in consumer discretionary ETFs. RXI is one example. While the fund does not strictly track the international auto industry, many of its holdings are car companies. Auto manufacturers among the fund's top 20 holdings include Toyota Motors (TM), Daimler AG (DDAIF), Honda, General Motors (GM) and Ford Motor Company (F). Overall, the automotive industry accounts for more than 10% of RXI's portfolio.
The fund seeks to replicate the performance of the S&P Global 1200 Consumer Discretionary Sector Index, with the automotive industry representing a significant portion of the fund's holdings. The fund is diversified globally, with 60% of the holdings in U.S. companies and 14% in Japanese companies. RXI's one-year, three-year and five-year performance comes in at 22.04%, 27.12% and 78.50%, respectively. (See also: Key Financial Ratios to Analyze the Automotive Industry.)