Time to Look at Auto Stocks?

If you are a value investor, you might want to divert your attention away from stocks for awhile and check out the bargains in the showrooms of the nation’s car dealers. Thanks to one of severest recessions in decades, car sales are in free fall and car makers/dealers are responding with substantial sales incentives.

The pressure to discount prices has only intensified in recent weeks as uncertainty over the future of General Motors (GM) and Chrysler scares away even more customers. In April, as the Financial Times of London reports, GM sales dropped -34% on a year-over-year basis, while those at Chrysler dived by -48%. Ford (F), unencumbered by insolvency fears, had better sales and may not be as hungry to generate sales.

Other car makers are suffering too — for different reasons. Toyota’s (TM) sales tumbled -42% due, in part, to a collapse in demand for the Prius hybrid (hit by the slide in gas price). Other weak spots (where good deals may surface) include BMW cars (-38%), Nissan’s (NSANY) Infiniti (-48%), Toyota’s Lexus -39%), and Daimler (DAI) Smart car (-50%).

After you buy your new car and return to focusing on stocks, you might want to zero in on auto stocks. Pent-up demand is building for cars and the recent steep declines in auto sales puts more pressure on legislators to introduce incentives like auto trade-in rebates.

Comments

[hoffman23]

As a veteran of the auto industry and as an investor, the only logic one could attribute to investing in auto stocks is that YOU CAN'T LOSE MORE THAN YOUR INVESTMENT !!!!! This industry is in freefall and NO ONE knows the answer. If they think they do, have I got a bridge in Brooklyn to sell you. Try CD's until this settles out. There will be plenty of time to buy in when the dust settles.

2009 May 02 07:40 PM

[sethmcs]

The stock market is 9 months ahead of the real economy. I agree with the author that auto sales at 9 million for the future is unlikely. The thing that I am surprised at is the Obama administration has not pushed Green auto incentives. That have been proven feasable in Germany, in light of the huge investment in the auto industry and professed green agenda. Too many irons in the fire? March was the time to get in up 150+% on Ford. 25% up on Ford Preferred. Ford has a long ways to run. $8 to $9 per share is my target by December.

2009 May 03 01:08 AM

[Crazyone]

FORD BABY

2009 May 03 03:08 AM

[Greener Pastures]

Not sure if you've heard of the up and coming "Cash for Clunkers" programs. Another incentive for buying new.

2009 May 03 04:51 AM

[hoffman23]

Don't be so quick to jump on the Ford bandwagon. Take a look at the Ford Credit lease portfolio. Lots of markdowns there that are not reaching to anyone's ears. So far, they have been lucky, not smart. Sometimes that works, sometimes not. It's your dice, not mine.

2009 May 03 09:04 AM

[psyctrip2]

You are absolutely right on about this!!!


On May 02 07:40 PM hoffman23 wrote:

> As a veteran of the auto industry and as an investor, the only logic
> one could attribute to investing in auto stocks is that YOU CAN'T
> LOSE MORE THAN YOUR INVESTMENT !!!!! This industry is in freefall
> and NO ONE knows the answer. If they think they do, have I got a
> bridge in Brooklyn to sell you. Try CD's until this settles out.
> There will be plenty of time to buy in when the dust settles.

2009 May 03 11:20 AM

[woodsey]

This retired auto worker and still UAW member says, "Nah!".

Our one term president says he doesn't want to run auto companies. No truer words were ever spoken. No he wants to punish. Well, see you in 2012 pal.

2009 May 03 02:51 PM

[cz]

Woodsey,
Knowing that a Republican administration would’ve loved to have stolen your pension and healthcare funds through forced bankruptcies (on 1-21-09), how could you publicly state that you (a UAW retiree) are in favor of that greedy ideology???

2009 May 03 04:20 PM

[Zekeko]

HAHAHAHA! Man oh man buy auto stocks??? Screw that if you believe auto stocks are a buy then why not buy a stock liK GE which is cheap and less risk?

Or buy steel b/c it takes steel to make cars. Nucor and Arcelor Mittal make more sense than GM or F

2009 May 03 09:49 PM