Seeking Alpha
Registered investment advisor, ETF investing, long-term horizon
Profile| Send Message|
( followers)  

First Trust Advisors last week (5/10/11) introduced the First Trust NASDAQ Global Auto Index Fund (NASDAQ:CARZ). CARZ becomes the second fund to focus on the global automotive industry and the first in an ETF format. The underlying index is a modified market capitalization weighted index of companies classified as automobile manufacturers. The index caps the five largest stocks at 8% and all others at 4% during each quarterly rebalancing.

CARZ presently has 32 holdings, and the annual index reconstitution is scheduled for next month. The 10 largest stocks are Daimler AG (OTCPK:DDAIF) - 7.9%, Ford Motor Company (NYSE:F) - 7.8%, General Motors (NYSE:GM) - 7.2%, Toyota (NYSE:TM) - 7.1%, Honda Motor (NYSE:HMC) - 7.0%, Hyundai Motor (OTC:HYMLF) - 5.2%, Kia Motors (OTC:KIMTF) - 5.0%, Volkswagen AG (OTCQX:VLKAY) - 4.3%, Bayerische Motoren Werke AG (OTCPK:BAMXY) - 4.2%, and Nissan Motor Co., Ltd. (OTCPK:NSANY) - 3.9%.

Nine countries are represented in the fund with Japan at 32.7%, Germany 20.2%, U.S. 17.7%, South Korea 9.9%, France 7.0%, China 5.2%, Italy 5.0%, Taiwan 1.4%, and Malaysia 1.0%.

Fidelity Select Automotive (FSAVX), the first automotive industry fund, was launched nearly 25 years ago in June 1986. It limped along with assets under $40 million for most of its existence. That changed in 2009 after the fund dropped more than 80% as the auto industry became one of the victims of the global financial crisis. Sensing a bargain, investors rushed in and assets climbed from $10 million at year-end 2008 to $122 million at the end of 2009 and $305 million by the close of 2010. FSAVX is actively managed and has the ability to invest in the automotive components industry, providing additional flexibility. The current expense ratio is 0.99%.

The CARZ Investor Guide (pdf) provides a brief historical perspective and industry projections for the next seven years. The ETF has an expense ratio of 0.70%, and additional details are provided on the summary page, press release (pdf), fact sheet (pdf) and prospectus (pdf).

Disclosure covering writer, editor and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Source: CARZ Automotive ETF: Hoping to Replicate Fidelity's Mutual Fund Success