November New Vehicle Sales Boost Auto Stock Returns

Includes: CARZ, F, GM
by: Julie Young

Increased spending confidence pushed U.S. auto sales higher in November. On a month-over-month basis, U.S. auto sales improved 4.7 percent. The calendar year comparison also showed a 13.9 percent gain with 2012 sales at 13.1 million through November versus 11.5 million through November of last year.

Consumers' improved confidence appears to be pushing sales higher. According to the Thomson Reuters/University of Michigan Consumer Sentiment Index, consumer confidence increased 4.3 points in October and was basically unchanged in November. The Conference Board's Consumer Confidence Survey also reported increases in consumer sentiment for October and November. In October the Consumer Confidence Index increased to 73.1 and in November it added an additional 0.6 points.

Consumer incomes appear to be backing their confidence. In October the Bureau of Economic Analysis reported little change in consumers' income and disposable income which increased less than 0.1 percent while real disposable income decreased 0.1 percent. On a quarterly basis, consumers' personal income and disposable income increased 2.2 percent and 2.1 percent, respectively, in the third quarter while real disposable income increased 0.5 percent.

Consumers' positive future outlook has also helped to increase borrowing levels for nonrevolving intermediate-term credit, which is substantially comprised of auto loans. In the third quarter intermediate-term credit loans increased 6.6 percent with a 9.2 percent increase in September.

The improvements in consumer confidence have helped to increase sales deliveries and retail sales, pushing stock returns higher for auto manufacturers.

Year-to-date through December 3, the NASDAQ OMX Global Auto Index has gained 19.08 percent. The Index, which contains 35 global auto industry constituents, also increased 8.21 percent in November.

Investors interested in investing in the NASDAQ OMX Global Auto Index can buy shares of First Trust's NASDAQ Global Auto Index Exchange-Traded Fund (NASDAQ:CARZ). On December 3 the fund's closing share price was $26.98 with a year-to-date return closely replicating the Index at 18.53 percent.

For investors seeking U.S. auto stock investments, Ford (NYSE:F) and General Motors (NYSE:GM) have topped NASDAQ's Global Auto Index constituent performance return list.

In November, Ford Motor Company's stock gained 10.51 percent. The U.S. auto manufacturer led the monthly sales list improving sales 5.4 percent over October and increasing calendar year sales by 5.0 percent. Year-to-date the stock has added 7.9 percent.

General Motors' stock gained 11.16 percent in November, leading the U.S. auto sales list on a year-over-year calendar basis with increased sales of 21.8 percent. The company's stock has also returned 25.85 percent year-to-date, outperforming the NASDAQ OMX Global Auto Index by 6.77 percent.

Overall, improved economic reports continued to increase consumers' confidence in November which in turn added demand for motor vehicles in the U.S. Investors can expect this trend to continue which should help to fuel increased auto sales and future auto stock gains in the near-term barring any major reversals in consumer expenditures resulting from fiscal budget issues.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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