Ride on a Recovering Auto Industry With These ETF & Stocks
October 5, 2020
After plunging the most in the second quarter since the Great Recession, the U.S. auto industry gathered momentum in the third quarter with sales rebounding from coronavirus-related lows and buyers returning to showrooms. This is especially true as new vehicle sales dropped 9.7% in the third quarter. This is small dip compared to the 31% decline in the second quarter (read: Beyond Clean Energy, 5 Best Global ETF Areas of Q3).
Of the six major American and Japanese automakers, Nissan NSANY stood at the bottom of the table, registering a 32.4% decline in sales last quarter followed by a drop of 11% for Toyota Motor TM, 10.2% for Fiat Chrysler FCAU, 9.9% for General Motors GM, 9.5% for Honda Motors HMC and 4.9% for Ford Motor F. American automakers — FCA, Toyota, and General Motors — saw a dramatic improvement from declines of over 30% in the second quarter.
Notably, car sales grew 4.8% in September from the year-ago month, representing the first monthly increase since February (read: 5 ETFs Shining Bright Amid September Selling).
Strong consumer demand for pick-up trucks and sport-utility vehicles as well as lower interest rates fueled sales last quarter. The strong trend is likely to continue as the Fed has pledged to keep rates at lower levels until the end of 2023 that will continue to accelerate lending and boost consumer spending. Persistent lower interest rates have encouraged new-car buying, pushing more consumers to avail loans. However, lean vehicle inventories could crimp sales in the fourth quarter.
Below we highlight the pure play auto ETF and a few stocks that could be attractive picks heading into the fourth quarter:
First Trust NASDAQ Global Auto ETF CARZ
This fund offers a pure-play global exposure to 34 auto stocks by tracking the NASDAQ OMX Global Auto Index. It is highly concentrated on the top firm with double-digit exposure while others make up for no more than 8.1% share. CARZ has a lower level of $28.9 million in AUM and trades in a small average daily trading volume of about 11,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with High risk outlook.
Tesla Inc. TSLA
It designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, Netherlands, Norway, and internationally. The stock saw solid earnings estimate revision of 20 cents over the past month for this year with more than 1000% estimated growth. Tesla has a Zacks Rank #3 and VGM Score of B (read: Tesla’s ‘Battery Day’: Pain or Gain for ETFs Over Long Term?).
BRP Inc. DOOO
This company designs, develops, manufactures and distributes recreational vehicles. The stock witnessed positive earnings estimate revision of couple of cents for the fiscal year (ending January 2021) over the past 30 days. It has a Zacks Rank #1 (Strong Buy) and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
PACCAR Inc. PCAR
It is a leading manufacturer of heavy-duty trucks in the world and has substantial manufacturing exposure to light/medium trucks. The stock witnessed earnings estimate revision of a penny for this year in a month. It has a Zacks Rank #3 and VGM Score of A.
Genuine Parts Company GPC
This company distributes automotive and industrial replacement parts and materials, and business products across the United States, Canada, Mexico, Australia, New Zealand, Singapore, Indonesia, France, the U.K., Germany and Poland. The stock witnessed positive earnings estimate revision of 6 cents for this year over the past 30 days. It has a Zacks Rank #2 (Buy) and VGM Score of A.
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Ford Motor Company (F): Free Stock Analysis Report
PACCAR Inc. (PCAR): Free Stock Analysis Report
Honda Motor Co., Ltd. (HMC): Free Stock Analysis Report
Nissan Motor Co. (NSANY): Free Stock Analysis Report
Toyota Motor Corporation (TM): Free Stock Analysis Report
General Motors Company (GM): Free Stock Analysis Report
Genuine Parts Company (GPC): Free Stock Analysis Report
Tesla, Inc. (TSLA): Free Stock Analysis Report
Fiat Chrysler Automobiles N.V. (FCAU): Free Stock Analysis Report
First Trust NASDAQ Global Auto ETF (CARZ): ETF Research Reports
BRP Inc. (DOOO): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.