Two Funds to Watch as Trouble Hits Auto Industry

Volkswagen’s emission control-cheating was revealed recently, which has hammered shares in the world’s largest auto maker and sent the firm’s now-former CEO into an early retirement. But while Volkswagen’s 38% slide over the past two weeks is blamed for poor auto industry performance, the chart below shows that values started depreciating at the end of May. Not many funds track the auto industry (we found just two) and between them the actively-managed Fidelity Select Automotive Portfolio (FSAVX) has been marginally less volatile than then the passive-managed First Trust Nasdaq Global Auto (CARZ) ETF. FSAVX allocates more than twice as much (56%) to U.S. car manufacturers than does CARZ (25%) and despite Volkswagen’s position as the world’s largest auto manufacturer, neither fund currently has the company among its largest ten holdings.

Both funds jumped out to an early lead over the S&P 500, but worries over China’s slowing economy have hit the industry hard. What makes these funds interesting contrarian plays is the data at home: U.S. auto sales have been strong while oil prices stayed low and are expected to reach a seasonally adjusted annual rate of 17.8 million in August, a ten-year high.