In this article, we will look at 10 best undervalued automobile stocks to buy now.
According to IBISWorld, the global car and automobile manufacturing industry is worth $2.9 trillion by revenue in 2022. It is estimated that by the end of 2022, the global car and automobile manufacturing industry will grow by 3.1%, after declining by an average of 0.6% per year over the past 5 years up till 2022.
The COVID-19 pandemic had a severe impact on the global automobile industry. New car registrations declined the most in 2020 than they had in the past two decades, according to BBC, and dropped to 1.63 million in 2020 from 2.3 million in 2019. Moving on to 2021, when lockdowns were lifted and operations resumed, the global automobile industry began its slow recovery process and reportedly experienced 1.65 million new car registration in 2021, up only 1% since the pandemic, and down 28.7% since pre-pandemic levels.
Fast forward to 2022, the global automobile industry is faced with the challenges of rising interest rates, high inflation, Covid-related lockdowns in China, and a global semiconductor shortage among others. The automobile industry is severely beaten-down and major players like Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM) are currently trading at a discount, making now the optimal time to buy these dips that have long-term potential.
Copyright: microolga / 123RF Stock Photo
Our Methodology
To determine the 10 best undervalued automobile stocks to buy now, we looked at the trailing-twelve-month PE ratios of major players in the global automotive industry. We also gave weight to the analyst and investor sentiment around each stock. We believe analyst and investor sentiment are critical indicators to determine a stock’s profitability. These stocks are ranked in descending order of their respective price-to-earnings ratios.
The hedge fund sentiment was sourced from Insider Monkey’s database, which as of Q1 2022, tracks roughly 900 elite hedge funds.
Best Undervalued Automobile Stocks to Buy Now
10. PACCAR Inc (NASDAQ:PCAR)
PE Ratio as of July 8: 14.25
Number of Hedge Fund Holders: 30
PACCAR Inc (NASDAQ:PCAR) designs, manufactures, and distributes light, medium, and heavy-duty commercial trucks in the United States, Europe, Mexico, South America, Australia, and internationally. It operates through three primary segments: Truck, Parts, and Financial Services.
On July 7, Cowen analyst Matt Elkott trimmed his price target on PACCAR Inc (NASDAQ:PCAR) to $92 from $100 and reiterated a Market Perform rating on the shares.
As of July 8, PACCAR Inc (NASDAQ:PCAR) has a trailing-twelve-month PE ratio of 14.25 and is offering a forward dividend yield of 1.68%, which makes it rank among the best undervalued automobile stocks to buy now.
At the end of the first quarter of 2022, 30 hedge funds were long PACCAR Inc (NASDAQ:PCAR) with stakes worth $253.15 million. This is compared to 34 positions in the previous quarter with stakes worth $380.39 million.
As of March 31, Harris Associates is the largest shareholder in PACCAR Inc (NASDAQ:PCAR). The fund’s stakes were valued at $184.06 million, up 2% from its prior stakes. The investment covers 0.24% of Harris Associates’ 13F portfolio.
Like Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM), PACCAR Inc (NASDAQ:PCAR) is trading at bargain levels right now and is presenting an attractive entry point for investors looking to invest in the consumer discretionary sector.
9. Oshkosh Corporation (NYSE:OSK)
PE Ratio as of July 8: 13.71
Number of Hedge Fund Holders: 28
Oshkosh Corporation (NYSE:OSK) designs, manufactures, and markets specialty vehicles and vehicle bodies worldwide. At the close of Q1 2022, 28 hedge funds were bullish on Oshkosh Corporation (NYSE:OSK) with stakes worth $130.79 million. This is compared to 26 hedge funds in the prior quarter with stakes worth $220.45 million.
On May 6, Oshkosh Corporation (NYSE:OSK) announced that it plans to allocate 100% of its free cash flow to M&A activity and shareholder returns. The company’s board of directors authorized an increase of the Oshkosh Corporation’s (NYSE:OSK) current share repurchase authorization by 8 million, bringing its total authorization to 12 million shares.
As of June 30, Citi analyst Timothy Thein has a $90 price target and a Neutral rating on Oshkosh Corporation (NYSE:OSK).
As of March 31, AQR Capital Management is the largest stakeholder in Oshkosh Corporation (NYSE:OSK) and has stakes worth $34.65 million in the company.
As of July 8, Oshkosh Corporation (NYSE:OSK) has a trailing-twelve-month PE ratio of 13.71 and a forward dividend yield of 1.83%.
Here is what FPA Queens Road, an investment management firm, had to say about Oshkosh Corporation (NYSE:OSK) in its first-quarter 2022 investor letter:
“Oshkosh Corporation (NYSE:OSK), a specialty vehicle manufacturer, fell during the year as the company’s performance was impacted by chassis and component shortages. Given its strong backlog and competitive position within its markets, we think the company remains an attractive opportunity.”
8. The Shyft Group, Inc. (NASDAQ:SHYF)
PE Ratio as of July 8: 13.18
Number of Hedge Fund Holders: 17
The Shyft Group, Inc. (NASDAQ:SHYF) manufactures and assembles specialty vehicles for the commercial vehicle and recreational vehicle industries in the United States and internationally. The company has two business segments: Fleet Vehicles & Services, and Specialty Vehicles. As of February 25, Raymond James analyst Felix Boeschen has a Strong Buy rating and a $57 price target on The Shyft Group, Inc. (NASDAQ:SHYF).
As of July 8, The Shyft Group, Inc. (NASDAQ:SHYF) has a forward dividend yield of 1.03% and a trailing-twelve-month PE ratio of 13.18.
At the close of Q1 2022, 17 hedge funds held stakes in The Shyft Group, Inc. (NASDAQ:SHYF). The total value of these stakes came in at $103.05 million, down from $132.39 million in the preceding quarter with 15 positions.
As of Q1 2022, Driehaus Capital is the most prominent shareholder in The Shyft Group, Inc. (NASDAQ:SHYF). The fund owns 1.13 million shares of the company which amounts to a stake of $40.85 million.
Artko Capital, an asset management firm, mentioned The Shyft Group, Inc. (NASDAQ:SHYF) in its fourth-quarter 2021 investor letter. Here is what the firm had to say:
“Shyft Group (SHYF) – 8.5% of Portfolio; $9.50 cost basis/$43.00 current price
Shyft Group continued to be the resounding winner in our partnership’s history, rising 73% in 2021, over 400% in our cost basis, and over 500% from our initial investment at $8.00 in mid-2017. It is our biggest holding by market capitalization at $1.5 billion, though of course at just $280mm when we first invested in the company. As a reminder SHYF designs, engineers, manufactures, and services purpose-built specialty vehicles and chassis through its Fleet Vehicles and Service (FVS) segment for companies like UPS and Amazon and the Specialty Vehicles (SV) segment which helps to build bodies for commercial trucks, RV homes, and construction vehicles.
The company continued to deliver in 2021, with 3rd quarter revenue growth of 34% and 42% on the first nine months of 2021 and raised its year-end guidance from $925mm to $950mm as well as its EBITDA/EPS numbers to $109mm/$1.99 from $105mm/$1.85. These are incredible numbers considering in 2017 the company had less than $30mm in EBITDA and $0.46 in EPS. With the leadership of their impressive CEO, Daryl Adams, the company has transformed itself by divesting its loss-making Emergency Vehicle Segment; substantially improving operations through Daryl’s manufacturing expertise; and executing on four relatively small tuck-in acquisitions, while riding the incredible 12% organic CAGR demand for major career fleets driven by the replacement cycle and a 10% CAGR in US package volume. While the company’s stock price appreciated through its substantial growth in profitability, of course, it also benefited from multiple expansions from mid-single digit EBITDA multiples to low to mid-teens today. As always, after a run-up like this, we like to make sure that the thesis is still intact. We believe that while the current inflationary pressures are important, the company is capable of managing them while continuing to ride the demand for FVS which we do not see abating, as well as introducing Electric Vehicle products for all sizes of class of commercial vehicles. We do not believe that the company’s 2025 targets of $1.75 billion in revenue and $265mm in EBITDA (i.e. 25% CAGR) are overly aggressive as the company continues to gain operating leverage and, keeping the current forward multiples in the current low teens, should result in another doubling of the stock to $90 per share. After taking consistent profits from this position over the years, we are comfortable with the current weighting in the portfolio and look forward to seeing Mr. Adams continue to execute as he has impressively done in the past.”
7. Toyota Motor Corporation (NYSE:TM)
PE Ratio as of July 8: 10.35
Number of Hedge Fund Holders: 9
On July 1, Toyota Motor Corporation (NYSE:TM) reported that it experience declining sales volumes in the U.S. in June. The company reported sales of 170,155 vehicles, down 17.9% year over year. The company reported that it sold roughly 40,000 electrified vehicles in June 2022, which represents 23.5% of its total monthly sales. Toyota Motor Corporation (NYSE:TM) noted that despite facing inventory challenges in 2022 so far, the company managed to launch new products such as the Toyota battery electric bZ4X, Tundra, and the hybrid Tundra, and also said that its consumers can expect further products by the end of 2022.
As of May 31, JPMorgan analyst Akira Kishimoto has a buy-side Overweight rating and a 2,600 yen price target on Toyota Motor Corporation (NYSE:TM).
As of July 8, Toyota Motor Corporation (NYSE:TM) has a forward dividend yield of 2.81% and a trailing-twelve-month PE ratio of 10.35.
Hedge funds are raising their stakes in Toyota Motor Corporation (NYSE:TM). At the end of Q1 2022, 9 hedge funds held stakes in Toyota Motor Corporation (NYSE:TM) worth $952.85 million. This is compared to 12 hedge funds in the previous quarter with stakes worth $943.76 million.
In Q1 2022, Ken Fisher’s Fisher Asset Management raised its stakes in Toyota Motor Corporation (NYSE:TM) by 4%, bring them to $925.65 million. Fisher Asset Management is the largest shareholder in the company.
Here is what Baron Funds, an asset management firm, had to say about Toyota Motor Corporation (NYSE:TM) in its first-quarter 2022 investor letter:
“Toyota’s (NYSE:TM) “kaizen” manufacturing philosophy is based on improving manufacturing by using “just in time” processes to eliminate waste and reduce inventory carrying costs. Clearly the company does not contemplates disruptive change that will dramatically lower costs and improve quality.”
6. Nissan Motor Co., Ltd. (OTC:NSANY)
PE Ratio as of July 8: 9.57
Number of Hedge Fund Holders: N/A
Nissan Motor Co., Ltd. (OTC:NSANY) manufactures and sells vehicles and automotive parts worldwide. It is the sixth-best undervalued automobile stock to buy right now because, as of July 8, the stock has a trailing-twelve-month PE ratio of 9.57.
Analysts are bullish on Nissan Motor Co., Ltd. (OTC:NSANY). As of April 25, Citi analyst Itay Michaeli has a $31 price target and a Buy rating on Nissan Motor Co., Ltd. (OTC:NSANY).
On May 20, Nissan Motor Co., Ltd. (OTC:NSANY) released a new EV in Japan, the Nissan Sakura. The Nissan Sakura is the company’s first battery-electric offering and carries a price tag of $14,000. The car has an electric range of 180 km, a horsepower rated at 63 hp, and a sports mode as well.
On July 1, Nissan Motor Co., Ltd. (OTC:NSANY) announced that the company’s Q2 2022 sales in the U.S. declined by 38.6% year over year and came in at roughly 183,000 units.
Nissan Motor Co., Ltd. (OTC:NSANY), Ford Motor Company (NYSE:F), Stellantis N.V. (NYSE:STLA), and General Motors Company (NYSE:GM) are some of the best undervalued automobile stocks to buy right now.
5. Honda Motor Co Ltd (NYSE:HMC)
PE Ratio as of July 8: 8.00
Number of Hedge Fund Holders: 12
This June, Honda Motor Corporation (NYSE: HMC) announced that it has formed a strategic partnership with Sony Group Corporation (NYSE:SONY) by which they will jointly develop, manufacture, and sell high-value-added electric vehicles and provide services for mobility. Both companies plan to form a new company dedicated to their joint EV venture in 2022 and expect the company to be fully operational by 2025.
As of July 8, Honda Motor Corporation (NYSE:HMC) has a trailing-twelve-month PE ratio of 8.00 and is offering a forward dividend yield of 5.78%.
At the end of Q1 2022, 12 hedge funds held stakes in Honda Motor Corporation (NYSE:HMC) worth $317.34 million. This is compared to 10 positions in the preceding quarter with stakes worth $327.80 million.
In the first quarter of 2022, Ken Fisher’s Fisher Asset Management raised its stakes in Honda Motor Corporation (NYSE:HMC) by 6%, bringing them to $243.21 million. Fisher Asset Management is the largest shareholder in the company as of Q1 2022.
4. General Motors Company (NYSE:GM)
PE Ratio as of July 8: 5.14
Number of Hedge Fund Holders: 76
On July 1, General Motors Company (NYSE:GM) reported that the company’s vehicle wholesale volumes suffered in the second quarter of 2022 due to supply chain constraints. The company said that it expects its net income for Q2 2022 to fall between $1.6 billion and $1.9 billion. Moreover, General Motors Company (NYSE:GM) reported that it sold roughly 582,000 vehicles in the U.S. in the second quarter of 2022, down 15% year over year. However, for the full year 2022, General Motors Company reaffirmed its net income guidance range of between $9.6 billion and $11.2 billion and its EPS-diluted guidance range of between $5.76 and $6.76. The company also still expects to increase its wholesale volumes increase by up to 30% year over year by the end of 2022.
As of June 5, Barclays analyst Brian Johnson has a $52 price target and an Overweight rating on General Motors Company (NYSE:GM).
In the first quarter of 2022, Berkshire Hathaway raised its stakes in General Motors Company (NYSE:GM) by 4%, bringing them to $2.71 billion. Berkshire Hathaway is the most prominent shareholder in the company.
As of July 8, General Motors Company (NYSE:GM) has a trailing-twelve-month PE ratio of 5.14.
At the close of Q1 2022, 76 hedge funds were long General Motors Company (NYSE:GM) with stakes worth $5.50 billion. This is compared to 90 positions in the preceding quarter with stakes worth $7.13 billion.
Oakmark Funds, an investment management firm, mentioned General Motors Company (NYSE:GM) in its “Oakmark Global Fund” first-quarter 2022 investor letter, here is what the firm said:
“General Motors (NYSE:GM) was a detractor during the quarter, due to increased macro uncertainty, higher fuel prices, and concerns over rising input costs, which pressured the company in particular and the auto industry as a whole. While we are closely monitoring the potential impact of these dynamics, industry demand remains robust, driven by strong consumer balance sheets and pent-up demand after multiple years of constrained production. We also remain confident in GM’s ability to navigate a complex operating environment, which the company has consistently demonstrated over the past few years. Finally, the long-term picture remains bright. We believe GM is significantly undervalued, is well-positioned for the long-term transition to electric vehicles and has numerous needle-moving ancillary business opportunities (most notably Cruise, which is an industry leader in autonomous vehicle technology) that are underappreciated.”
3. Volkswagen AG (OTC:VWAGY)
PE Ratio as of July 8: 5.14
Number of Hedge Fund Holders: N/A
Volkswagen AG (OTC:VWAGY) manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company operates through four primary segments: Passenger Cars and Light Commercial Vehicles, Commercial Vehicles, Power Engineering, and Financial Services. Some of Volkswagen AG’s (OTC:VWAGY) most prominent brands are Audi, Bentley, Porsche, Lamborghini, Ducati, and Bugatti.
Analysts are bullish on Volkswagen AG (OTC:VWAGY). On May 31, HSBC analyst Edoardo Spina raised his price target on Volkswagen AG (OTC:VWAGY) to EUR 234 from EUR 230 and upgraded the stock to Buy from Hold. On July 7, UBS analyst Patrick Hummel trimmed his price target on Volkswagen AG (OTC:VWAGY) to EUR 230 from EUR 280 and reiterated a Buy rating on the shares.
As of July 8, Volkswagen AG (OTC:VWAGY) has a trailing-twelve-month PE ratio of 5.14 and is offering a forward dividend yield of 4.11%, which makes it an undervalued dividend-paying automobile stock to invest in now.
2. Ford Motor Company (NYSE:F)
PE Ratio as of July 8: 4.06
Number of Hedge Fund Holders: 46
On July 4, Ford Motor Company (NYSE:F) reported that its sales in the U.S. in June 2022, increased by 31.5% year over year to roughly 152,000 units. The majority of share gains came from the company’s F-Series, Explorer, and Expedition vehicles and also the company’s battery-electric offerings. Ford Motor Company (NYSE:F) also reported that its F-150 Lightning was America’s best-selling electric truck in June.
As of June 1, Goldman Sachs analyst Mark Delaney has a $14 price target and a Neutral rating on Ford Motor Company (NYSE:F).
As of July 8, Ford Motor Company (NYSE:F) is offering a forward dividend yield of 3.44% and has a trailing-twelve-month PE ratio of 4.06.
At the close of Q1 2022, 46 hedge funds were bullish on Ford Motor Company (NYSE:F) and held stakes worth $1.23 billion in the company. This is compared to 53 positions in the previous quarter with stakes worth $1.70 billion.
In Q1 2022, D E Shaw raised its stakes in Ford Motor Company (NYSE:F) by 10%, bringing them to $528.36 million. As of March 31, D E Shaw owns over 31.24 million shares of Ford Motor Company (NYSE:F) and is the most prominent shareholder in the company.
Here is what Baron Funds had to say about Ford Motor Company (NYSE:F) in its first-quarter 2022 investor letter:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
1. Stellantis N.V. (NYSE:STLA)
PE Ratio as of July 8: 2.72
Number of Hedge Fund Holders: 29
Stellantis N.V. (NYSE:STLA) engages in the design, manufacture, and sale of automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, and production systems worldwide. Some of the most prominent brands under which the company markets its products include Alfa Romeo, Chrysler, Dodge, Fiat, Jeep, Maserati, and Peugeot.
Analysts are bullish on Stellantis N.V. (NYSE:STLA). On July 7, UBS analyst Patrick Hummel trimmed his price target on Stellantis N.V. (NYSE:STLA) to EUR 18.50 from EUR 25 but reiterated a Buy rating on the shares.
As of July 8, Stellantis N.V. (NYSE:STLA) has a trailing-twelve-month PE ratio of 2.72 and is offering a forward dividend yield of 8.66%, factors that make it rank high among the best undervalued automobile stocks to buy now.
At the end of Q1 2022, 29 hedge funds held stakes in Stellantis N.V. (NYSE:STLA). The total value of these stakes came in at $1.25 billion. This is compared to 23 hedge funds in Q4 2021 with stakes worth $1.25 billion.
As of March 31, Arrowstreet Capital is the leading shareholder in Stellantis N.V. (NYSE:STLA) and owns over 50.6 million shares of the company. The fund’s stakes were valued at $829.49 million and the investment covers 1.03% of its 13F portfolio.
You can also take a look at 10 Electric Car Stocks to Buy for 2022 and 10 Best Self Driving Car Stocks to Invest In.
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Disclosure: None. 10 Best Undervalued Automobile Stocks to Buy Now is originally published on Insider Monkey.
