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4 ETFs For Rising Auto Sales (VROM, XLY, IWS)

by
March 13, 2012 2:53 pm
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U.S. retail sales rose 1.1% in February and, no pun intended, it was auto sales that drove the overall number higher. Last month, auto sales climbed 1.6% from January and surged almost 7% from February 2011. What’s important about auto sales figures is that the numbers only measure cars sold to consumers, not to corporations or car rental outfits.

A rebounding U.S. economy has proven to be excellent news for the likes of Ford (NYSE: F) and General Motors (NYSE: GM), but there are other ways to profit from resurgent auto sales.

Here are the ETFs that could race higher as global auto sales continue their upward momentum.

Global X Auto ETF (NYSE: VROM)
The virtues of the Global X Auto ETF have been extolled one just needs to know where to look. While thinly traded, VROM is one of the better discretionary plays out there, having jumped more than 24% year-to-date almost double the returns offered by the Consumer Discretionary Select Sector SPDR (NYSE: XLY).

Maybe the best reason to like VROM is that the ETF is not heavily allocated to just Ford and GM. Rather, VROM offers exposure to the German and Japanese auto giants and parts suppliers as well.

First Trust Germany AlphaDEX Fund (NYSE: FGM)
When it comes to Germany-specific ETFs, the iShares MSCI Germany Index Fund (NYSE: EWG) is the oldest and largest. When it comes to getting exposure to German automakers via an ETF, the newly minted First Trust Germany AlphaDEX Fund is the superior alternative.

The auto industry is major part of the German economy and this is the world’s second-largest exporter we’re talking about, so if the global economy gains steam, FGM’s weight to Volkswagen, Daimler, BMW, etc. could actually make the fund the top performer among Germany ETFs.

Consumer Discretionary Select Sector SPDR (NYSE: XLY)
XLY is known for its allocations to stocks such as McDonald’s (NYSE: MCD), Walt Disney (NYSE: DIS) and Nike (NYSE: NKE), among others, but Ford is one of the ETF’s top-10 holdings. Beyond that, XLY is home to 80 stocks and when including Ford, 11 of those stocks are auto industry plays. Looking at XLY’s chart, it would appear advisable to wait for a pullback, but with economic data supporting more gains in discretionary stocks, that pullback may not materialize.

iShares Russell Midcap Value Index Fund (NYSE: IWS)
When an ETF is home to 530 stocks as the iShares Russell Midcap Value Index Fund is, no single stock or niche group is going to account for an excessive portion of the fund’s weight. That’s true with IWS, but the ETF does feature smaller allocations to an array of auto parts suppliers. IWS has been on a tear since late December 2011 and the chart indicates the ETF needs to crack $48.50 to confirm a breakout.

Financials account for almost a third of IWS’ weight so the ETF could be in play for other reasons as soon as this week.


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