The automotive industry continues to prove itself as the strength of the economy, producing jobs and strengthening its ecosystem with new fuel saving initiatives. June’s U.S. auto sales further prove my point – making the whole space a buy – but one company is the most attractive.
Above & Beyond Expectations
For the month of June, sales more than tripled expectations with a 6% year-over-year gain to 264,843 units. Of course, crossovers remain top performers with gains of 9%, but trucks/SUVs with an 8% gain also impressed.
For General Motors Company (NYSE:GM), sales rose 6% as a 38% rise in Cadillac and a new all-time best for the Chevy Volt led the company to beat expectations. Yet, strangely, despite these strong numbers, shares still traded flat to modestly lower on Tuesday. The reason: Strong performance by Ford Motor Company (NYSE:F), as it shows that it is currently the best performing company in the space.
Ford Motor Company (NYSE:F) saw its stock rise by 2.6% on Tuesday, coming behind a 13% year-over-year gain in monthly sales. Much like General Motors Company (NYSE:GM), cars were strong, contributing a 12% gain as the largest segment. However, it was the continuation of strength among trucks that really impressed investors, as the segment rose an inspiring 20%.
Is It Time to Buy Auto Makers?
In this economy, we simply don’t see massive segments of the U.S. growing at such rapid rates, nor do we see the largest of these companies leading the way with year-over-year growth. Yet, this has been the trend for the better part of four years, as General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) have rapidly recovered from the recession.
Most people look at the past year for these auto makers and see fairly strong periods of performance. Both stocks have gained approximately 75%. Yet, what very few realize is that both are actually underperforming the market on an extended chart period.
Since January 2011, General Motors Company (NYSE:GM) has traded with a loss of 2.45% and Ford Motor Company (NYSE:F) has lost 3.7% of its valuation. During the same period, the S&P 500 has produced gains of 28%. With the auto industry being the fastest growing of the large economic industries, I find this as a reason to buy.