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Many auto sector stocks have been hit hard recently, and that has created some potential buying opportunities. Much of the weakness in this sector appears to be related to renewed recession fears. Most of these stocks have declined so much, they appear to be already priced for a recession. While recession fears have hurt these stocks, now might be a perfect time to buy them, because oil prices have also dropped substantially, and that is positive for auto sales and consumer spending. In fact, lower oil prices might even prevent a recession from either happening or at least make it a short one.
These stocks have low PE ratios and appear oversold. In particular, I am looking at the Relative Strength Index [RSI] levels, which can indicate oversold conditions. Stocks with an RSI rating around 30 can signal that the shares are oversold and due for a rebound. To learn more about RSI, read this.
Here are several auto sector bargains:
General Motors (GM) shares are trading at $21.65. These shares have a relative strength index of about 26, which indicates the shares are very oversold. GM is a leading automaker. The 50 day moving average is $28.22. Earnings estimates for GM are just over $4.27 per share in 2011 and $4.77 for 2012, so the P/E ratio is only about 5.
Ford Motor Co. (F) shares are trading at $10.07. These shares have a relative strength index of about 32, which indicates the shares are oversold. The 50 day moving average is about $16.61 and the 200 day moving average is about $14.03, so these shares are trading at strong support levels. Ford shares hit a 52 week high of $18.97 earlier this year. Earnings estimates for F are $1.97 per share in 2011 and $1.99 for 2012 which puts the P/E ratio at about 5.
Tongxin International (OTCPK:TXIC) is trading for about $1.20 per share. This company manufactures vehicle body structures, and has corporate headquarters in Birmingham, Michigan, with manufacturing plants in China. These shares have seen a trading range of 94 cents to $4.85 in the past 52 weeks. The 50 day moving average is $1.29, and the 200 day moving average is $1.31. The company recently gave the following preliminary financial results "At December 31, 2010, cash, cash equivalents, and restricted cash (security deposit) totaled approximately $10.8 million. Total current assets at December 31, 2010 totaled approximately $64.2 million compared to $67.5 million at December 31, 2009. Total current liabilities totaled approximately $71.4 million at December 31, 2010 compared to $79.7 million at December 31, 2009." Read more on that here. Those figures indicate the stock is deeply undervalued, and it could trade for a few dollars per share once current financials are reported.
Goodyear Tire (GT) shares are trading at $10.98. Goodyear is a major tire manufacturer. These shares have a relative strength index of about 31, which indicates the shares are oversold. The 52 week range is $9.10 to $18.83. The 50 day moving average is $15.41, and the 200 day moving average is $14.22. Estimates for GT are about $1.60 per share in 2011 and $2.26 for 2012. Lower oil prices will help boost profit margins for Goodyear.
American Axle (AXL) shares are trading at $7.98. These shares have a relative strength index of about 34, which indicates the shares are at oversold levels. AXL is a leading manufacturer of automotive components. The 50 day moving average is about $10.47 and the 200 day moving average is about $12.05. Earnings estimates for AXL are $2.08 per share in 2011 and $2.26 for 2012. The P/E ratio is about 4. This stock has probably dropped more than some because it has a high debt load, which is always a concern in a recession. However, this stock looks too cheap.
Magna International Inc. (MGA) shares are trading at $34. These shares have a relative strength index of about 26, which indicates the shares are oversold. MGA is a major auto parts manufacturer. The 50 day moving average is $46.76, and the 200 day moving average is $49.93. Earnings estimates for MGA are about $4.80 per share in 2011 and $5.24 for 2012, which puts the P/E ratio at around 6.
Tata Motors Ltd., (TTM) shares are trading at $15.81. These shares have a relative strength index of 25, which indicates the shares are very oversold levels. Tata is a major automobile maker with luxury brands like Jaguar and Land Rover, and is based in India. The 50 day moving average is $20.65, and the 200 day moving average is $25.28. Earnings estimates for TTM are at $2.97 per share in 2011, and $3.42 for 2012. The 52 week range is $15.38 to $37.65. TTM pays a dividend of 42 cents which is equivalent to a 2.7% yield.
The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.
The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.
Source: 7 Dirt Cheap Auto Sector Stocks