10 Best Auto Stocks To Buy Now

Published on December 6, 2020 at 4:55 pm by Alexandr Oleinic in Hedge Funds, Lists

In this article, we are going to present a list of the 10 best auto stocks to buy now.

Automotive industry is very big and includes a large number of companies many of which are publicly traded. This allows investors to buy shares and earn money as these companies grow. However, there are several factors to consider when picking an automotive stock for your portfolio, one of which being the overall state of the economy. Cars are included in the consumer durables sector and are closely tied to the overall economic situation, which makes sense because when there is a downturn in the economy people are less likely to buy a new car. For example, the last recession has deeply affected most car makers, and even caused General Motors Company (NYSE:GM) to file for Chapter 11.

However, while sales of cars are cyclical, the costs that automakers incur are not, as their factories, employees, suppliers require payment no matter how many vehicles they manage to sell. That’s why when picking an auto stock to invest in, it’s a good idea to check the company’s cash position and fixed costs to better understand what situation the company is going to be in should a recession come (which is more a question of “when” rather than “if”). This year, even though we avoided a recession, the auto industry was one of the hardest hit by the pandemic and experts predict it will take years for a recovery to 2019 levels.

Another factor to take into account is where the company stays in regard to latest consumer and even political trends. For example, currently electric vehicles are highly popular around the world due to their low environmental impact, which is why many large auto makers have committed to launching more electric vehicles. However, manufacturers of electric vehicles also face high costs and other challenges, such as limited range of vehicles, longer re-charge time compared to re-fueling a vehicle powered by an internal combustion engine. In addition, technology is also constantly evolving and it might be the case that hydrogen will actually be the fuel of the future, so it might be worth it to consider looking into companies that have mentioned working with hydrogen as a fuel source for their vehicles.

So if you’ll get a list of all auto stocks, you’ll likely have to sift through a lot of data to identify which are the best auto stocks to buy now. However, we have the solution to this problem and can help you identify the 10 best auto stocks to buy now. We will look into the financial performance and latest updates of auto stocks that we have selected, but the list was compiled based on just one metric. This metric is the hedge fund sentiment, and it shows how popular an individual stock is among hedge funds.

At Insider Monkey, we track over 800 hedge funds and are closely monitoring their holdings to identify their most popular picks. By following this strategy we have managed to outperform S&P 500 ETF (SPY) by more than 66 percentage points since March 2017. Amid the pandemic, our strategy that picks top 10 most popular picks among hedge funds returned nearly 30% by the end of November, compared to around 13% for SPY. If you want to find our more, make sure to check out our premium newsletters that provide our latest stock picks. Also, make sure to subscribe to our free daily newsletter to stay up to date with hedge fund news and our latest updates.

Having said that, let’s take a look at our list of the 10 best auto stocks to buy now. The list is based on hedge fund picks from the latest round of 13F filings (for the end of September) and it includes both companies that make cars as well as trucks.

10. Fiat Chrysler Automobiles NV (NYSE:FCAU)

Fiat Chrysler Automobiles NV (NYSE:FCAU) saw 20 funds from our database holding long positions as of the end of September, unchanged over the quarter. Among these investors, Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the top shareholder, even though it cut its stake by 65% on the quarter to 6.80 million shares. Other investors include John Overdeck and David Siegel’s Two Sigma Advisors and Paul Marshall and Ian Wace’s Marshall Wace LLP, which added Fiat Chrysler to its portfolio.

After the pandemic affected the company during the first two quarters, the US-Italian carmaker saw a recovery during the July-September period, with a growth in pickup trucks and Jeeps in the US. The company posted an adjusted EPS of 0.97 euro ($1.18) for the third quarter, beating the estimates by 0.57 euro and revenue of 25.81 billion euro topped the expectations by 770 million euro.

Fiat Chrysler is currently in the process of merging with PSA, a French multinational car maker that owns the Peugeot, Citroen, DS, Opel and Vauxhall brands. The companies agreed to merge in December 2019 and they expect the deal to be completed in the first quarter of 2021. The merged group, called Stellantis, will be the fourth largest carmaker in the world with projected sales of 7.9 million vehicles per year and revenue of 180 billion euros.

9. Xpeng Inc – ADR (NYSE:XPEV)

Xpeng Inc – ADR (NYSE:XPEV) and Li Auto Inc. are both newcomers to our list of stocks that hedge funds are fond of and both immediately captured the attention of 26 investors that disclosed long positions in the last round of 13F filings. Among the investors that acquired shares of the company are Larry Chen and Terry Zhang’s Tairen Capital and Josh Resnick‘s Jericho Capital Asset Management, which disclosed stakes worth $81.48 million and $27.01 million.

Xpeng Inc – ADR (NYSE: XPEV) is a Chinese electric vehicle manufacturer headquartered in Guangzhou, but which also has offices in Mountain View, California. The company, which has Xiaomi Corp and Alibaba Group Holding Ltd – ADR (NYSE:BABA) among its investors, was founded in 2014 and four years later started production of its first model, the Xpeng G3 SUV and a year later it released the second model, the P7.

Since it went public on August 26, Xpeng saw its stock more than triple from the $15 IPO price. Earlier this month, Xpeng Inc – ADR (NYSE:XPEV) said it delivered 4,224 vehicles in November, up by more than 340% over the year and since the beginning of the year it delivered 21,341 vehicles.

8. Li Auto Inc. (NASDAQ:LI)

As mentioned above, Li Auto Inc. (NASDAQ:LI) is another new joiner, as the company went public at the end of July pricing its stock at $11.50 Since then, the stock surged by more than 260%. Unlike Xpeng, Li Auto focuses on plug-in hybrid vehicles (PHEV), which the company believes is better for the Chinese market which doesn’t have a well-developed EV-charging infrastructure. Li Auto Inc. (NASDAQ:LI)’s current model is Li Xiang One, a luxury mid-size crossover SUV that was presented last year and first deliveries took place in early 2020. So far this year, Li delivered 26,498 units of Li One.

Among the 26 hedge funds tracked by Insider Monkey that held shares of Li Auto are Jericho Capital Asset Management, Glen Kacher’s Light Street Capital, and Andreas Halvorsen’s Viking Global.

7. Ferrari NV (NYSE:RACE)

In Ferrari NV (NYSE:RACE), the number of funds with long positions surged by six to 31 during the third quarter. These funds include Nicolai Tangen’s Ako Capital, Anand Desai‘s Darsana Capital Partners, and Dan Loeb’s Third Point.

Expectedly, the pandemic also affected the luxury sports car manufacturer. If in the first quarter, the company’s shipments were up by 4.9% on the year to 2,738 units, in the second quarter deliveries slumped by an annual 48% to 1,389 units. In the third quarter, Ferrari said it shipped 2,313 units, down by just 161 units compared to the same period of the last year. Ferrari also said it recorded revenue of 888 million euro ($1.08 billion), down by 3% on the year. For the full year, Ferrari NV (NYSE:RACE) expects revenue up to 3.4 billion euros and adjusted diluted EPS of around 2.8 euro.

6. PACCAR Inc (NASDAQ:PCAR)

Truck maker PACCAR Inc (NASDAQ:PCAR) ranks sixth in our list of 10 best auto stocks to buy now, as 34 hedge funds tracked by us disclosed owning shares of the company in their latest 13F filings, four more than a quarter earlier. Moreover, the aggregate value of these funds’ holdings surged to $442.10 million from $244.39 million as most investors upped their positions. For example, the two largest shareholders of PACCAR Inc (NASDAQ:PCAR) among the investors tracked by us, Brandon Haley’s Holocene Advisors and Jim Simons‘ Renaissance Technologies increased their positions by 691% and 86%, respectively, to 1.02 million shares and 825,778 shares.

For the third quarter, PACCAR Inc (NASDAQ:PCAR) posted revenue of $4.54 billion, down by 24.3% on the year, but still $100 million better than expected. In addition, EPS of $1.11 topped the consensus estimate of $0.98. In terms of deliveries, Paccar seems also to be on recovery path as third-quarter deliveries doubled compared to the second quarter as the company delivered 36,000 units.

5. Nio Inc – ADR (NYSE:NIO)

Nio Inc – ADR (NYSE:NIO) saw an increase in popularity during the third quarter, as the number of funds bullish on the company went up by five to 35 during the third quarter, and the aggregate value of their holdings surged to $1.40 billion from $567.82 million at the end of June. Among the top shareholders of Nio are Jim Simons‘ Renaissance Technologies and D. E. Shaw’s D E Shaw, which reported stakes worth $295.76 million and $242.22 million, respectively.

The stock of the Chinese ev manufacturer surged by nearly tenfold since the beginning of the year as the company continued to show growing sales. In the third quarter, Nio Inc – ADR (NYSE:NIO) said it delivered 12,206 vehicles, up from 4,799 vehicles a year earlier and 10,331 in the second quarter. At the same time, the company’s revenue of $666.6 million topped the estimates by $50.32 million and net loss of $0.14 per share was higher than the expected loss of $0.17 per share.

4. Ford Motor Company (NYSE:F)

In Ford Motor Company (NYSE:F), there were 38 funds holding $1.08 billion worth of stock at the end of September, substantially higher compared to 30 funds and $791.59 million a quarter earlier. Among these funds, Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is the top shareholder with a stake containing 49.43 million shares, up by 44% on the quarter. Other investors include Richard S. Pzena’s Pzena Investment Management, Edgar Wachenheim’s Greenhaven Associates, and Ken Griffin’s Citadel Investment Group.

At the beginning of December, Ford Motor Company (NYSE:F) disclosed its sales for the last month, reporting a decline of 20.9% on the year to 149,931 vehicles. Nevertheless, Ford’s third-quarter sales topped expectations with EPS of $0.65 an revenue of $34.71 billion beating the consensus estimates by $0.47 and $1.81 billion, respectively.

3. Navistar International Corp (NYSE:NAV)

Navistar International Corp (NYSE:NAV) is the third best auto stock to buy now and the most popular truck manufacturer among the funds tracked by Insider Monkey. At the end of September, 43 funds disclosed owning shares of the company, up by 10 compared to three months earlier. Billionaire activist investor Carl Icahn is one of the top shareholders of Navistar International Corp. In its latest 13F filing, Icahn reported holding 16.73 million shares worth $728.42 million, the position being the seventh largest in the portfolio. Icahn’s former protégé Mark Rachesky’s MHR Fund Management is also largest, reporting ownership of 16.23 million shares.

Icahn and Rachesky have recently been involved in a feud involving Navistar. In February, Volkswagen subsidiary Traton offered to acquire Navistar International Corp (NYSE:NAV) for $35 per share, a deal that Rachesky thought was much too low according to reports. Nevertheless, around a month ago, Traton and Navistar signed a definitive merger agreement for $44.50 per share and both Icahn and Rachesky agreed to support the deal. It is expected to close sometime next year.

2. General Motors Company (NYSE:GM)

Even though the number of investors bullish on General Motors Company (NYSE:GM) declined by nine, it still is the second most popular auto stock among the funds tracked by Insider Monkey, as 60 of them reported holding shares in their latest 13F filings. Billionaire Warren Buffett‘s Berkshire Hathaway continues to remain one of the top shareholders of General Motors, reporting ownership of 80 million shares in its latest 13F filing.

Recently, GM said it would recall 7.0 million SUV and pickup truck models worldwide to replace potentially faulty Takata air bag inflaters. The company had estimated that the costs for replacing the inflators would amount to $1.2 billion. In addition, General Motors have been of late committed to expand its electric vehicle lineup, saying it would raise spending on EVs by 35% to more than 27 billion. By 2025, General Motors Company (NYSE:GM) plans to have 30 electric vehicles offered across the world.

1. Tesla Inc (NASDAQ:TSLA)

Probably unsurprisingly, but Tesla Inc (NASDAQ:TSLA) is the most popular auto stock among the funds tracked by Insider Monkey as 67 funds held in aggregate $8.18 billion worth of its stock at the end of the third quarter, versus 63 investors with $5.56 billion worth of shares at the end of the previous quarter. Among the top shareholders of Tesla in our database are Philippe Laffont’s Coatue Management, which upped its stake by 903% to 3.11 million shares worth $1.33 billion and Alex Sacerdote’s Whale Rock Capital Management, which raised its position by 178% to 1.70 million shares worth $731.28 million.

The stock of the largest EV maker in the world has surged by nearly 600% so far this year as the company has been growing aggressively, launching production of Model 3 in China and announcing the highly expected Model Y and Cybertruck. Recently, the Model Y received the approval to start selling in China. The vehicle will be produced at Tesla Inc (NASDAQ:TSLA)’s facility in Shanghai. Tesla started production at the Shanghai factory last December and in October alone it sold more than 13,000 vehicles in the country. The company also has started exporting Chinese-built Model 3 vehicles to Europe and has built additional capacity in Shanghai for the Model Y production.

Please also see 10 best cheap stocks to buy now according to Ray Dalio and 11 best lithium and battery stocks to buy now.

Disclosure: None.