Tag Archives: sales

The Market Has Discounted The Biggest Growth Story For The Next Decade

China slowed-growth worries have created a buying opportunity for long-term China. Relative to other international equities – China has value in developed as well as emerging market funds. Investors should consider allocating more capital out of the US which is trading at premium valuations into China trading below historic valuations. Haven’t you heard? Chinese GDP growth is slowing – run for the hills. These seems to be the consensus as Chinese equity markets have taken a plunge YTD . Examine the five-year chart of some popular Chinese ETFs (exchange-traded-funds). (click to enlarge) This dip has created an excellent buying opportunity for certain regions of the world, with China being my top pick. To start I took a look at the major countries and examined the broad ETFs that tracked the respective countries. From there I looked at the sales growth in the funds and removed negative sales; since the focus here is on growth at a reasonable price. From there I accessed data from Worldbank to gather historic and future estimated GDP growth. The results are below, filtered on an average PEG score from low to high. (click to enlarge) China remains my top pick because while growth is slowing; it is still growth! The next four year average growth estimate is still above 7%, with a P/E that is roughly half of the S&P 500. The middle-class continues to expand and disposable income has been on a healthy upward trend. Funds that should do well in the next decade include: SPDR S&P China ETF (NYSEARCA: GXC ), iShares China Large-Cap ETF (NYSEARCA: FXI ), iShares MSCI China ETF (NYSEARCA: MCHI ), and iShares MSCI Hong Kong ETF (NYSEARCA: EWH ). The first three funds are very similar as they are invested primarily in China emerging markets, whereas is 94% developed markets and only 6% emerging. Investors may want to consider one developed and one emerging – which both look attractive after the market correction. If you just want broad exposure to the Asia Pacific region I would recommend the low expense and reasonably valued Vanguard Pacific VIPERS (NYSEARCA: VPL ). This fund is 63% Japan, 18% Australia, 17% Asia developed and 2% Asia emerging. Another interesting way to play China while taking on more firm-specific risk would be to buy a familiar U.S. company with exposure to China. The chart below shows restaurant companies operating income across varied geographic regions: (click to enlarge) My favorite picks in the above list are Starbucks (NASDAQ: SBUX ) with a PEG of 1.6 and Yum! Brands (NYSE: YUM ) with a PEG of 1.7. Other ideas to buy at a discount to the recent selloff with exposure to China include Boeing (NYSE: BA ) who will most likely be unscathed by slightly less growth in this region. Resort companies such as Las Vegas Sands (NYSE: LVS ) or MGM Resorts International (NYSE: MGM ) have fallen more than I would have expected considering the peculiar fact that people tend to continue to gamble even in periods of economic downturns. My prediction is that gambling in the Macau region will pick up and buying now is a good opportunity for the next decade. (click to enlarge) I’m sure there are numerous ways you can conjure to play a re-bound in the Chinese sell-off. I’m interested to hear your comments on what you think the best way to play a rebound in China is. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FXI,GXC,SBUX,YUM,LVS, MCHI over the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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.