Tag Archives: auto

CARZ ETF Zooms Ahead On 10-Year High Auto Sales

In August, the automakers witnessed the highest rate of increase in light vehicle sales in the U.S. in 10 years. Sales on a seasonally adjusted annualized rate (“SAAR”) surged to 17.81 million units in August 2015 from 17.3 million units in August 2014. This was the highest pace since July 2005. Moreover, the SAAR finished above the 17 million mark for the fourth straight month in August. However, U.S. light vehicle sales nudged down 0.7% year over year to 1.51 million units in August 2015. Low oil price, a recovering economy, improving labor market condition, and easy availability of credit with lower interest rates and longer repayment periods were the main reasons behind the surge in sales on a SAAR basis. However, the inclusion of the Labor Day weekend in September this year, compared to August last year, resulted in a year-over-year decline in August sales figures. While Ford Motor Co. (NYSE: F ) registered the highest year-on-year improvement in August among the major automakers, General Motors Company (NYSE: GM ) recorded the best sales figure for the month in absolute terms. Auto Sales in Detail Ford reported a 5% increase in U.S. sales from the year-ago period to 234,237 vehicles, witnessing its best August sales in nine years. Meanwhile, FCA US LLC – controlled by Fiat Chrysler Automobiles N.V. (NYSE: FCAU ) – recorded a 2% year-on-year gain in sales to 201,672 vehicles, registering its highest August sales since 2002. This was also the 65th consecutive month in which the company reported a year-over-year gain in sales. However, General Motors recorded 270,480 vehicle sales in August, marking a 0.7% year-over-year decline. Though retail sales improved 5.9% to 224,978 units, the company witnessed a 24% plunge in fleet sales in August. Separately, sales performances from the major Japanese automakers were disappointing last month. Toyota Motor Corporation’s (NYSE: TM ) sales went down 8.8% year over year to 224,381 units. Sales also declined 5.3% on a daily selling rate (“DSR”) basis from the year-ago period. Moreover, Honda Motor Co., Ltd. (NYSE: HMC ) recorded a 6.9% year-over-year decline in sales on a volume basis to 155,491 vehicles in the month. Also, Nissan Motor Co. Ltd. ( OTCPK:NSANY ) reported a 0.8% year-over-year decrease in sales to 133,351 vehicles in August. Catalysts Behind the Surge The overall improvement in the U.S. economy has helped the auto sector to register solid gains in the past few months. The “second estimate” released by the U.S. Department of Commerce last month showed that the GDP in the second quarter advanced at a pace of 3.7%, significantly higher than the first quarter’s rise of only 0.6%. Though the economy created only 173,000 jobs in August, down from July’s tally of 245,000, the unemployment rate declined to 5.1% from July’s rate of 5.3%. Meanwhile, the market is witnessing a freefall in crude prices since the middle of last year. In fact, the price of West Texas Intermediate (WTI) fell nearly 60% as compared to mid-2014, when oil was trading above $100 each barrel. This oil plunge is also playing a major role in boosting auto sales. Moreover, automakers are aiming to increase market share by offering large incentives and discounts to customers. Additionally, banks are providing more car loans with lower interest rates and longer repayment periods. Further, the high average age of cars on U.S. roads has led to increased replacement demand both for cars and for parts. CARZ in Focus The auto ETF – First Trust NASDAQ Global Auto ETF (NASDAQ: CARZ ) – gained nearly 2% following the release of the auto sales report on Sept. 1 through Sept. 3, before losing 2.2% last Friday. It has a decent exposure to the above-mentioned stocks, excluding FCA US LLC, and is thus poised to gain from improving auto trends in the coming days. The ETF tracks the Nasdaq OMX Global Auto Index, giving investors exposure to automobile manufacturers across the globe. The product holds 37 stocks in the basket with Ford, Honda, Toyota, Daimler and General Motors comprising the top five holdings with a combined allocation of more than 40% of fund assets. In terms of country exposure, Japan takes the top spot at 36.6% while the U.S. takes the second spot having around 24.8% allocation, followed by Germany with 19.1% exposure. The ETF is unpopular with $32.4 million in its asset base and sees light trading volume. The product seems to be slightly expensive with 70 bps in annual fees and has a dividend yield of more than 1.7%. The fund has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Bottom Line The improving auto industry has been one of the drivers of the recent economic growth in the U.S. Auto sales will continue to be a tailwind for the economy in the coming days. It is also speculated that the auto sector is poised for further gains given the favorable macroeconomic fundamentals. Original Post Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Summer Madness To Nut Case? A Fall Preview Of ETFs

Summer 2015 saw investors sweating it out on the markets as the U.S. stock market ran into a correction territory thanks to the China gloom, Fed uncertainty, emerging market weakness and slumping commodities. Perhaps they should have stuck to the popular trading adage “Sell in May and Go Away”. After all, the May end to early September period has historically been known for melting profits at the bourses. This time around, the markets went berserk with performances swinging from sky-high in certain sectors to dreadful by others. Will the markets continue to shake in fall as well? Let’s check out: Housing Booms The housing market fired on all cylinders in summer thanks to soaring demand for new and rented homes, rising wages, accelerating job growth, affordable mortgage rates, and of course increasing consumer confidence. Among the most notable data, new home construction jumped to an almost eight-year high in July and existing home sales rose to an eight-year high. Further, homebuilder confidence in August surged to a level not seen in decades. The robust numbers spread optimism across the sector with the iShares U.S. Home Construction ETF (NYSEARCA: ITB ) and the SPDR Homebuilders ETF (NYSEARCA: XHB ) touching new highs on August 18 and 19, respectively. Both the ETFs have a decent Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook and were up 3.6% and 0.1%, respectively, over the past three months. The outperformance is likely to continue in the coming months given that the residential and commercial building industry has a solid Zacks Rank in the top 29%. China Glooms China has been roiling the global stock markets since the start of the summer with worries intensifying last month when the country surprisingly devalued its currency renminbi by 2% to ramp up exports. After that, sluggish factory activity data heightened fears of China’s hard landing and the resultant global damage. This led to terrible trading in China ETFs, which were the hot spot at the start the year. Even the latest round of monetary easing by the People’s Bank of China (PBOC) to fight the malaise did not help the stocks to recover the losses. Given the steep decline in the stocks, China ETFs had a bloodbath with the Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) and the Deutsche X-trackers Harvest CSI 500 China-A Shares Small Cap ETF (NYSEARCA: ASHS ) stealing the show. Each of the funds was down over 20% in August and nearly 53% over the past three months. CNXT has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook while ASHS has a Zacks ET Rank of 3. Rough trading in China is likely to continue at least in the near term given that the world’s second-largest economy is faltering with slower growth, credit crunch, a property market slump, weak domestic demand, lower industrial production and lower factory output. Corporate profits are also lower than a year ago. Additionally, a slew of recent measures are not helping in any way to revive investors’ confidence. Further, most analysts believe that China will continue to face a long period of uncertainty that would result in more volatility Crazy Run of ‘The Oil’ After a stable start to summer, oil saw a frenzied August, showing large swings in its prices. In fact, the commodity exhibited the maximum volatility in 24 years . This is because oil price enjoyed its biggest rally of more than 25% in the last three days of August but softened again as worries about growth in the Asian powerhouse resurfaced. U.S. crude was trading around $60 per barrel for most of the first half of summer but gradually dropped to nearly $38 per barrel on August 25 – a level not seen since 2009. Oil suddenly sprung up to over $49 per barrel for a three-day period ending August 31, and again retreated to around $46 per barrel. Even after the spectacular three-day performance, energy ETFs failed to recoup their losses made in mid-to-late summer. In particular, stock-based energy ETFs like the First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) and the PowerShares S&P SmallCap Energy Portfolio ETF (NASDAQ: PSCE ) plunged 35.9% and 32.4%, respectively, over the past three months while futures-based energy ETFs like the iPath S&P Crude Oil Total Return Index ETN (NYSEARCA: OIL ) and the United States Oil ETF (NYSEARCA: USO ) lost 31.6% and 27%, respectively. FCG and PSCE have a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook. The outlook for oil and the related ETFs look dull at present given the unfavorable demand and supply dynamics. In fact, the International Energy Agency (IEA) in its recent monthly report stated that the global oil market would remain oversupplied through 2016 though lower oil prices and a strengthening economy will boost oil demand at the fastest pace in five years. Yet, demand is currently not as strong as expected given the China slowdown and weakness in emerging markets. Automotive Thrives The U.S. automotive industry is on top gear with fat wallets, rising income and increasing consumer confidence adding adequate fuel. This is especially true as auto sales have been consecutively on the rise over the past four months with sales remaining above the healthy 17-million mark. The industry is likely to flourish going forward given that the economy is gaining traction after the first-quarter slump. Economic activity is picking up, labor market is strengthening, consumer spending is increasing, and the housing market is improving. Additionally, lower gasoline price is a huge boon to auto sales. The upside can be further confirmed by the solid Zacks Industry Rank, as about two-thirds of the industries under the auto sector have a strong Zacks Rank in the top 30%, suggesting growth ahead. Investors could ride out this surging sector with the only pure play the First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) . The fund was a victim of recent broad sell-off, shedding 16.4% over the last three months. However, the ETF has a solid Zacks ETF Rank of 2 with a High risk outlook, urging investors to take advantage of the current beaten down price. Link to the original post on Zacks.com

Is It A Temporary Recovery For Oil?

Famous American industrialist, Jean Paul Getty once said: “Formula for success: rise early, work hard, strike oil.” Though the major oil suppliers followed Getty’s formula seriously, they forgot to consider the demand side. Since the middle of last year, the market is witnessing a free fall in crude prices. In fact, the price of West Texas Intermediate (NYSE: WTI ) fell nearly 60% as compared to mid-2014, when oil was trading above $100 each barrel. Though the price of WTI surged nearly 6% on Friday after jumping 10% a day before, there are still speculations that the momentum is hardly sustainable. The slump in oil prices took a toll on energy shares over the past few months. The biggest energy fund – the Energy Select Sector SPDR ETF (NYSEARCA: XLE ) – lost 8% and 17% in the past one-month and three-month periods, respectively. The slowdown in Chinese economy, an increase in the U.S. rig count, a stronger dollar and oversupply concerns emerged as the key reasons behind the slump. Will It Sustain? The recovery in crude prices at the latter half of last week comes as a surprise, since the fundamentals driving oil price are not so strong. A better-than-expected second-quarter U.S. GDP report, the rebound in Chinese stock markets and the decline in oil inventory emerged as the main reasons behind the surge. However, it is anticipated that these factors had a temporary effect on crude price, and will fail to offset the weak global economic picture and oversupply concerns in the long term. In China, which is the world’s second largest consumer of oil, manufacturing activity for the month of August touched the lowest level in the last six and a half years, basically underlining a frail economy. This also highlights that if China wants to reach its 7% GDP growth target in 2015 – the lowest in years – the country will have to come up with measures to stimulate its economy. In fact, without a step-up, some analysts apprehend that China’s economic activity may fall below 7% in the third quarter. Moreover, news that oil producers increased their rig count for five straight weeks shocked an already oversupplied market. Separately, the nuclear deal between Iran and the U.S. raised concerns about increased oil supply. Moreover, buoyed by higher output from Iraq and Saudi Arabia, the Organization of Petroleum Exporting Countries (OPEC) is currently producing oil higher than their target. Also, foreign oil companies are finding it more profitable to sell crude in an environment of stronger dollar, which in turn, is putting pressure on oil supply. Who are Making the Most? Recently released auto sales data indicates the benefits from the low oil price environment. U.S. auto sales came in ahead of expectations in July, fueled by demand for light trucks and sports-utility vehicles rather than fuel-efficient cars. The seasonally adjusted annual sales rate (SAAR) climbed 3.2%, from June to 17.6 million in July, its second highest tally in a decade. Meanwhile, the airline industry is one of the major gainers from this situation. In the second quarter, the aviation industry is said to have amassed a record quarterly profit of more than $5 billion. The plunge in fuel prices, along with strategic investments to bring in more passengers on board has buoyed profit margins. In this situation, the Auto fund – the First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) – and airlines fund – the U.S. Global Jets ETF (NYSEARCA: JETS ) – will remain on investors’ radar in the coming days. Separately, along with strong labor market conditions, the decline in oil prices has played an important role in boosting consumer spending. According to the “advance estimate” released by the U.S. Department of Commerce, Real Personal Consumption Expenditure rose 2.9% during the second quarter, higher than the first quarter’s growth rate of 1.8%. Moreover, the Commerce Department reported that retail sales increased 0.6% in July from the previous month, in which sales had remained flat. Core retail sales increased 0.3%, following revised gains of 0.2% in June. In this favorable environment, investors will closely watch the performances of top two retail funds, the SPDR S&P Retail ETF (NYSEARCA: XRT ) and the Market Vectors Retail ETF (NYSEARCA: RTH ), in order to analyze the sector trend in coming days. Bottom Line With less and less possibility of a sustainable oil price recovery in the upcoming months, investors will do well to focus on the sectors discussed above in this volatile environment. Original Post