The spring auto buying season is almost here. Investors can participate by owning equities or exchange-traded funds in the sector.
Auto and related auto part equities have a history of moving higher from March 3 to May 3. Average return per period during the past 20 periods was 9.0 per cent. The trade is triggered when consumers start to enter the auto showrooms early in March following much publicized auto shows in January and February when new models and innovations are displayed.
What about this year? Colder-than-average weather in North America already has delayed the start of the annual rush to buy new cars. January light vehicle sales in the U.S. dropped 3.0 per cent on a year-over-year basis. February sales also were slightly lower, but beat consensus estimates after car dealers boosted incentives. Weather conditions suitable for new car sales in March are not much better to date. Accordingly, the annual seasonal trade in auto and related equities and ETFs has been delayed this year. Typical during colder-than-average winters, a strong rebound occurs slightly later into spring. The auto industry continues to project U.S. new car sales at 16 million units in 2014. In addition, auto sales in Canada, China, Japan, other Far East countries, the United Kingdom and South America are expected to record modest gains in 2014.
The easiest way to participate in the sector is to own an exchange-traded fund with the appropriate symbol: CARZ. The First Trust NASDAQ Global Auto Index Fund consists of a basket of 38 global auto and auto components equities. Largest weights in the basket are Daimler AG, Volkswagen AG, Toyota Motor, Ford Motor and Honda Motor.
On the charts, CARZ at $39.62 has an improving technical profile. The trend has been neutral since last September. A trading range between $36.54 and $40.68 has been established. Strength relative to S&P 500 index has just turned positive. Units recently moved above their 20- and 50-day moving averages. Investors looking for a seasonal trade will want to see improving technical signs before entering. A move above US$40.68 will attract technical buying.
Don and Jon Vialoux are authors of free daily reports on equity markets, sectors, commodities, and Exchange Traded Funds. . Daily reports are available at http://TimingTheMarket.ca/ and http://EquityClock.com. They also are Research Analysts for Horizons ETFs Management (Canada) Inc. All of the views expressed herein are their personal views although they may be reflected in positions or transactions in the various client portfolios managed by Horizons ETFs Management (Canada) Inc.
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- First Trust NASDAQ Global Auto Index Fund$36.31-0.18(-0.49%)
- Updated May 24 3:52 PM -4GMT. Delayed by at least 15 minutes.