New Auto ETF Exemplifies Growing Auto Market - TheStreet

NEW YORK (

TheStreet

) -- Throw together a growing auto market with a company that aggressively starts ETFs, and there you have it: the

Global X Auto ETF

(VROM)

.

Trading began Thursday for the shares, which represent an index of the world's 50 largest automotive manufacturers and suppliers, as measured by market cap. Many of the names are familiar: The top three holdings are

Toyota

(TM) - Get Report

at 10.3%,

Daimler

at 10.2% and

Ford

(F) - Get Report

at 9.4%.

GM

(GM) - Get Report

may be poised to become the world's largest automaker in terms of 2011 sales, but it is tenth at 2.7%. And among the top ten holdings, only number seven,

Johnson Controls

(JCI) - Get Report

, is not an auto manufacturer.

New York-based Global X Funds is a fast-growing ETF provider with about $1.8 billion in managed assets and ETFs in everything from autos to overlooked countries like Colombia and Argentina to fishing. Over half of the market cap of the 20 companies held by the

Global X Fishing Industry ETF

-- its symbol is FISN -- is associated with companies based in Norway and Japan.

Not surprisingly, Global X CEO and fund manager Bruno Del Ama, a 35-year-old native of Spain with a Wharton MBA, said the time is right to buy into the global auto industry.

"Obviously, through the financial crisis the auto sector, particularly in the U.S., had huge balance sheet problems," he said. "A lot of that has gone away with restructuring, and you have the cleanest balance sheets globally you've ever had, as well as very strong demand not only in emerging markets but also in the U.S. and western Europe."

Reminded that it might have been wise to start such a fund two years ago, Del Ama responded: "It would have been nice if you picked it at the bottom, but the fundamentals continue to be strong

particularly because eight of ten people living in emerging markets."

Indeed, emerging market growth is one of the two major investment themes here. Just one other fact: Currently, less than 1% of India's population owns a vehicle. So it is easy to see why on Wednesday, Ford said it would

expand an engine plant in India, and on Thursday, Ford said it will

build a transmission in China.

A second major theme is electrification. Del Ama said the trend is being encouraged by government incentives, which vary from country to country but are typically worth several thousand dollars. While Ford CEO Bill Ford said in a

Fortune

magazine article published Tuesday that 25% of Ford's fleet will be electric by 2010, Del Ama estimated the worldwide number will be somewhat less than 25%, but probably more than 10%.

The point is: It will clearly increase from about 1%, where it is today.

As for a specific number, Ford said this: "It's really hard to predict. You might as well throw a dart. One thing I've learned is that you can't push technology. It has to be pulled."

One more fact about the auto ETF is that it is not all big-cap companies: "You have a fair amount of mid-cap companies and auto parts companies," Del Ama said. He noted that the smallest holding, is

Tesla

(TSLA) - Get Report

. "If you anticipate growth in the electric vehicle segment, that would have an impact," he said.

-- Written by Ted Reed in Charlotte, N.C.

>To contact the writer of this article, click here:

Ted Reed