Auto stocks have been hammered in the last six months. Domestic sales are improving, but worries about Europe have hurt investor sentiment. Many are now 50% or more under consensus price targets, and look like they are building technical bases at current price levels. Here are three with low valuations, technical support which vastly underperformed the S&P in 2011, and significant upside potential in 2012.
TRW Automotive (NYSE:TRW) –
“TRW Automotive Holdings Corp., together with its subsidiaries, designs, manufactures, and sells automotive systems, modules, and components for automotive original equipment manufacturers and related after-markets. It operates in four segments: Chassis Systems, Occupant Safety Systems, Electronics, and Automotive Components”. (Yahoo Finance)
Performance YTD: -38.64%
Current Price: $31.63
Consensus Price Target: $59.50
Key value observations on TRW:
- The stock looks like it is building a technical base at these levels (See Chart).
- TRW is a five star pick from the S&P with a price target of $75, more than twice its current price level.
- TRW is too cheap at less than 5 times earnings and operating cash flow.
- This company will be one of the primary beneficiaries of stabilization in Europe as it gets 50% of revenues from the eurozone.
Ford Motor (NYSE:F) –
“Ford Motor Company primarily develops, manufactures, distributes, and services vehicles and parts worldwide. It operates in two sectors, Automotive and Financial Services”. (Yahoo Finance)
Performance YTD: -35.19%
Current Price: $10.81
Consensus Price Target: $15
Key value observations on F:
- Ford is selling at the bottom of its five year valuation range based on Price to Earnings and Price to Value.
- The stock is building a technical base at just under these price levels (See Chart).
- Insiders have been buying new shares over the last several months.
- Ford is selling at just 6.8 times forward earnings and a five year projected PEG of under .8.
General Motors (NYSE:GM) –
“General Motors Company (GM) operates as a global automaker. It produces cars and trucks and sells them under the brand names Baojun, Buick, Cadillac, Chevrolet, GMC, Daewoo, Holden, Opel, Isuzu, Vauxhall, Jiefang, FAW, and Wuling”. (Yahoo Finance)
Performance YTD: -44.72%
Current Price: $20.09
Consensus Price Target: $33
Key value observations on GM:
- The stock looks like it is putting in a bottom at just under $20 (See Chart).
- Numerous insiders bought shares in the third quarter. GM also sells for 6 times operating cash flow and 21% of sales.
- GM is a secular play on the growth of China, where it is rapidly growing car sales and revenues.
- GM has a much lower cost structure post bankruptcy. S&P has it listed as a five star pick with a price target of $34.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TRW over the next 72 hours.