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Ford Motor Company (F), The Goodyear Tire & Rubber Company (GT): Three Stocks to Invest in the Improving Auto Market

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The automotive industry continues to recover at a rapid pace. The decline in the unemployment rate, coupled with low interest rates, have propelled automotive sales in the United States. Although a typical strategy to gain exposure to the automotive market is to invest in car manufacturers, a Foolish investor may also be interested in parts manufacturers. Auto parts companies should fare well as auto demand increases. The following three stocks may be bought as a basket to expose a portfolio to the automotive industry.

Ford Motor Company (NYSE:F)

The automaker

Ford Motor Company (NYSE:F) is one of the giants in the automotive manufacturing business. The company is developing faster, more comfortable, and more fuel-efficient vehicles. As Ford Motor Company (NYSE:F) continues to develop more fuel-efficient cars, its presence in the European and Asian markets should continue to grow–and that’s important because gas prices in Europe and Asia are sometimes more than double that of the U.S.

From a fundamental analysis perspective, Ford Motor Company (NYSE:F) trades with a P/E ratio of 10.6, and a forward P/E of 9.45, while the industry’s P/E average is around 14. Ford Motor Company (NYSE:F) reported an outstanding first quarter as it increased net income to $1.6 billion, an increase of $215 million over last year. The Mustang sports car developer also saw a steep increase in units sold in North America, despite some weakness in international markets.

Regarding the future, Ford Motor Company (NYSE:F) is poised for more growth.  The domestic market continues to strengthen and the Asian market is improving despite fierce competition from Honda Motor Co Ltd (ADR) (NYSE:HMC) and Toyota Motor Corporation (ADR) (NYSE:TM).  Sales in European markets increased for the first time since 2011, which should boost revenue.  Ford Motor Company (NYSE:F) also increased its sales by 14% in May, the best number for May since 2005.

A good year

Despite recent underperformance by The Goodyear Tire & Rubber Company (NASDAQ:GT)., the stock is ready for a rebound. Since auto sales are increasing, the demand for tires goes right along with it. The Goodyear Tire & Rubber Company (NASDAQ:GT) continues to be a top choice for the supply of tires to car manufacturers.  North America makes up for 50% of its revenue per year, but one of the key drivers will be higher demand in emerging markets such as Latin America and Asia. Furthermore, revenues from Europe should start picking up as demand for autos strengthens.

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