Auto ETFs And Stocks To Ride On This Holiday Season

By | December 2, 2015

Scalper1 News

The auto industry has been on a high gear and remains on track to break the all-time record of 17.35 million vehicles reached in 2000. Once again, the monthly auto sales data spread bullishness into the entire industry across the globe. In particular, auto sales rose 1.4% year over year to an annualized 18.2 million units in November. This represents the highest auto sales in 14 years and the third consecutive month of 18 million plus sales. Five of the six major American and Japanese automakers reported solid sales growth for November. Nissan ( OTCPK:NSANY ) led the way higher with 4% growth, followed by sales increases of 3% for Fiat Chrysler Automobiles (NYSE: FCAU ), 3.0% for Toyota (NYSE: TM ), 1.5% for General Motors (NYSE: GM ) and 0.3% for Ford Motor (NYSE: F ). However, Honda’s (NYSE: HMC ) auto sales fell 5% last month. A major boost came from attractive year-end offers, Black Friday deals, higher demand for sport utility vehicles, cheap fuel and low financing costs. Further, a plethora of new models, the need to replace aging vehicles, higher income, increasing consumer confidence, and higher spending power are adding enough fuel. The robust trend is likely to continue this month as well, as automakers continue offering discounts and holiday season incentives. Further, about two-thirds of the industries falling under the auto sector have a strong Zacks Rank in the top 39%, suggesting healthy growth. As such, investors seeking to take advantage of the current boom may consider the ETFs and stocks from this corner of the broad market. ETFs to Buy First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) This fund offers pure play global exposure to the 37 auto stocks by tracking the NASDAQ OMX Global Auto Index. It is a large-cap centric fund, highly concentrated on the top 10 holdings with about 62% of assets. The four prime automakers – General Motors, Ford, Honda and Toyota – are among the top five holdings. In terms of country exposure, Japan takes the top spot at 36.8% while the U.S. and Germany round off the next two spots with 23.4% and 18.3% share, respectively. CARZ is under appreciated as indicated by its AUM of only $41.1 million and average daily trading volume of about 10,000 shares. The product charges 70 bps in fees per year and has gained 2.4% in the year-to-date time period. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) While XLY provides broad exposure to the consumer discretionary space, investors could go for this product as it has an at least 8% allocation to the auto industry. It holds 90 securities in its basket and some well known automakers like Ford, General Motor, O’Reilly Automotive (NASDAQ: ORLY ) and Delphi Automotive (NYSE: DLPH ) make up for a nice mix in the portfolio. It is the largest and the most popular product in this space with AUM of nearly $11.7 billion and average daily volume of roughly 6.6 million shares. It charges 14 bps in annual fees from investors and has gained 14.3% so far this year. The fund has a Zacks ETF Rank of 2 with a Medium risk outlook. Stocks to Buy We have used our Zacks stock screener to find out the best stocks in the auto space having a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Style Score of ‘B’ or better. The Growth Style Score analyzes the growth prospects of a company with a thorough analysis of the income statement, balance sheet and cash flow statement that evaluate its financial health and the sustainability of growth trajectory. The results show that stocks with Growth Style Scores of A or B when combined with Zacks Rank of 1 or 2 offer the best upside potential. Superior Industries International Inc. (NYSE: SUP ) Based in Southfield, Michigan, Superior Industries is one of the world’s largest original equipment manufacturer (OEM) of aluminum wheels for the automotive industry. It designs, manufactures and supplies cast aluminum road wheels to the automobile and light truck manufacturers. The stock has seen positive earnings estimate revisions from 90 cents to 93 cents per share for 2015 over the past 60 days, representing a year-over-year increase of 43.1%, which is much higher than the industry average of 5.4%. The company delivered an average positive earnings surprise of 32.44% in the last four quarters. The stock has a Zacks Rank #1 with a Growth Style Score of B, meaning that it is primed for further growth in the months to come. Motorcar Parts of America Inc. (NASDAQ: MPAA ) Based in Torrance, California, Motorcar Parts is a leading manufacturer of auto parts like replacement starters, alternators, wheel hub assemblies, bearings and master cylinders used for imported and domestic passenger vehicles, light trucks, and heavy-duty applications in the United States and Canada. The company has seen a solid earnings positive estimate revision of 6 cents for the current fiscal year over the past 60 days and is expected to grow at an annual rate of 24.4% versus negative industry growth. Further, the company delivered positive earnings surprises in the three of the past four quarters, with an average beat of 4.64%. The stock currently has a Zacks Rank #1 with a Growth Style Score of B, suggesting incredible growth in the months ahead. Bottom Line Holiday fervor, massive discounts, an improving economy, and increased consumer spending will continue to drive U.S. auto sales higher in the weeks ahead, making the above ETFs and stocks compelling choices for investors to play this holiday season. Original Post Scalper1 News

Scalper1 News