The automotive industry has rebounded strongly from the hard hit performance during the recession. The biggest winner this year is of course the newcomer electric car manufacturer, Tesla Motors (TSLA - Analyst Report).
The shares of TSLA surged about 8% over the past four trading sessions and are up about 250% since the start of the year, making the company one of the hottest stocks in the market, and a favorite pick among growth investors (read: Top ETFs of the First Half of the Year).
Inside the Incredible Surge
The astounding performance was mostly attributable to optimism raised by some brokerage firms about the automotive industry in the U.S., as well as the company being a leading electric vehicle maker, and one of the first successful new car makers in decades.
Auto sales in the U.S. grew 9% in June to 1.40 million units, translating into a 13.2% year-over-year rise to a seasonally adjusted annual rate (SAAR) of 15.96 million units, the fastest since Dec 2007. The increase was largely attributable to a growing popularity of pickups among buyers amidst improvements in housing, construction and energy sectors.
Further, strong pent-up demand, a plethora of new models, lower interest on auto loans and a resilient economy leading to higher consumer confidence contributed to the big push in auto sales (read: Tesla Motors to Replace Oracle in Nasdaq 100, QQQ ETF Next?).
Beyond this solid industry data, the growth levels for TSLA are also impressive. The company is expected to see growth of 81% for the current year, and an enormous 173% rate for the next. Additionally, optimism over electric car demand for the future will likely push the stock up to new heights.
Given these factors, it looks like Tesla, even at its current levels, may still be a great candidate for a portfolio. There are not only positive industry trends behind the firm, but a variety of company specific reasons—such as strong growth rates and increased optimism from analysts—which suggest that there is still time to get in on this amazing growth story.
The stock currently has a Zacks Rank #1 (Strong Buy), indicating that this trend can definitely continue in the near future (read: 3 Hot Sector ETFs Surging to #1 Ranks).
ETFs to Watch
Given the huge surge in TSLA price, the ETFs having heavy exposure to this auto company are in focus. Investors should closely monitor the movement in these funds and grab any opportunity from a surge in the TSLA price (see more in the Zacks ETF Center):
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - ETF report)
This fund tracks the NASDAQ Clean Edge Green Energy Index and managed assets worth $61.9 million. It charges 60 bps in fees per year while volume is light suggesting wide bid/ask spread.
In total, the product holds 36 securities in its basket. Tesla Motors occupies the top position in the basket with 10.33% of assets. Technology firms dominate this ETF, accounting for over two-fifths of the assets while oil & gas and industrials make up for at least 21% share each.
QCLN gained 2.4% in the past four days and is up about 69% in the year-to-date time frame (read: Clean Energy ETFs: The Real Bull Market?).
Market Vectors Global Alternative Energy ETF (GEX - ETF report)
This ETF tracks the Ardour Global Index, focusing on companies that are primarily engaged in the business of alternative energy. The fund holds about 31 stocks in its basket with AUM of $81.8 million while charging 62 bps in fees per year. Average daily volume is also paltry for this fund.
Here again, TSLA is the top firm with a 10.90% allocation. From a sector perspective, industrials take the largest share with 42.6%, closely followed by information technology (26.2%) and utilities (15.0%). In terms of country exposure, the fund is skewed towards the U.S. with 53.3% share while Ireland, China, Italy and many others receive minor allocations.
The ETF added 1.8% in the past four days and over 52% so far this year.
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