2 Automakers To Buy Now On Strong June Sales, 3 To Avoid

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Includes: F, GM, HMC, TM, TTM
by: IncomeHunter

June sales numbers are in for auto companies, and the majority of them reported incredibly strong numbers. This will help improve investor confidence, as it shows that the industry is not slowing nearly as much as some have expected. This additional revenue will also bring good things to the stock, especially if it continues in the future. General Motors (GM), Ford (F), Honda (HMC), Toyota (TM), and Tata Motors (TTM) have released their sales numbers, and these are the stocks I will focus on. Four of them have reported good numbers, as their sales numbers have gone up in comparison to June of last year. Tata has not done this though, and this will certainly have a bad effect on the stock.

General Motors is currently trading around $21, which is just above its 52-week low of $19. It currently has a price/book ratio of 1.06 and a price/sales ratio of 0.20.

It is in a good position now, as there has been great demand for its vehicles, which led its U.S. sales numbers to increase by 15.5% in the month of June. In fact, this was the company's best monthly performance in nearly four years. Not only did sales go up in general, but they went up for every brand. Buick sales increased the most, as they went up 27%, but Chevrolet, GMC, and Cadillac experienced double-digit sales growth as well. All of this shows that General Motors is strong at the moment, and this should help bring its stock up from the current low price. I recommend this stock, both for how cheap it is and for how well General Motors has done.

Ford is also trading near its 52-week low. It is currently trading around $10, and the 52-week low is $9.05. It has a price/book ratio of 2.16 and a price/sales ratio of 0.26.

Like General Motors, Ford should be benefiting from reporting its June sales numbers, but the stock will probably not make as large of moves as General Motors. Ford sales rose by 7% in June, which is respectable, but it is a weaker sales increase than its competitors. It even reported a decrease in its small car sales. For example, Fiesta sales took a hit, falling by 17.1%. While Ford has strong segments, therefore, it has weak segments as well. I think the stock will make some slight gains as a result of its June sales numbers, but I would not recommend investing in it, as many competitors appear stronger at the moment.

Honda stock is currently sitting between its 52-range, trading around $35, and it rose fairly consistently throughout June. Its price/book ratio is 1.12, and its price/sales ratio is currently 0.62.

In comparison to Ford and General Motors, Honda appears even better at the moment. It reported an increase in U.S. sales by 48.8% in June, and these are its best sales numbers for June since 2008. This is a significant development for the company, and I believe the stock will maintain its upward trend as a result of this success. Its luxury division, Acura, was the most successful, bringing a 76.5% increase in June sales. Luxury car sales are currently surging in general, as Toyota's Lexus division brought in an even higher 85.9% increase. This shows that the new Acura models are bringing success to Honda, as luxury cars are currently a growing part of the auto market. I would strongly recommend investing in Honda for its incredibly strong sales numbers.

Toyota is currently trading around $81, and while it has been rising, it is near its 52-week high of $87.15. It currently has a price/book ratio of 0.96 and a price/sales ratio of 0.55.

Toyota is the strongest company when it comes to the sales increases for the month of June. In addition to its impressive numbers with its Lexus division, sales from the Toyota division rose by 57.5% on a raw volume basis. Together, this amounts to an increase of 60.3% for sales in the month of June. This is the largest increase of the companies I am addressing in this article, so it may seem like the best investment. I am not too excited about the stock because of its high price though, so I would only give a hesitant recommendation of Toyota stock, even with its great sales numbers.

Tata Motors currently lies between its 52-week high of $30.63 and its 52-week low of $14.33, and it is trading around $22. It maintained a fairly consistent price throughout the month of June, but I do not believe this will continue.

While most auto companies have reported strong improvements in sales, Tata Motors has actually reported a 3% decrease in June sales. This may not be a huge loss, but in comparison to other auto companies, Tata Motors looks quite weak. Light commercial vehicles are the biggest product for the company, and these sales were up by 22%. Medium and heavy vehicles sales were down by 21% though, and passenger vehicle sales were down by 22%. Since the biggest part of the company is strong, there is some reason for hope with this company. Other auto companies are doing so much better though, so I still do not recommend investing in Tata Motors.

With the exception of Tata Motors, June sales numbers were very impressive for auto companies. I am not recommending Tata Motors, therefore, and I am not recommending Ford either, as its sales increase was too minor in comparison to the others. While Toyota posted the strongest numbers, I am not giving it a very strong recommendation, due to its high price. Honda and General Motors appear to be the best stocks at the moment. Both posted impressive numbers and achieved their best sales numbers in some time. If I had to recommend one over the other though, I would choose General Motors. It is quite cheap at the moment, so I believe there is great potential for investors to make a good profit.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.