Want to Up Your Stock Portfolio? Consider Automakers

by Jon LeSage, edi­tor, Used Car Mar­ket Reports

Sol­id recov­ery from plung­ing sales in 2009 and finan­cial tur­moil in Detroit – and like­ly from a sta­ble and strong used vehi­cle mar­ket – are dri­ving stock prices for automak­ers.

Sales could go to 16M units this year as con­sumers feel bet­ter about the econ­o­my and want to replace their aging vehi­cles, and loans and leas­es are more acces­si­ble. Resale val­ues are expect­ed to drop as lease returns increase, but over­all prices are expect­ed to remain rel­a­tive­ly strong.

Europe may also be sta­bi­liz­ing in its finan­cial mar­kets. Esca­lat­ing demand in Asia is also help auto stock prices.

Gen­er­al Motors shares have been respond­ing well to the company’s per­for­mance with a 57% rise in the past year; Ford has seen a 78% increase; Tes­la Motors has seen share prices hit unbe­liev­able high lev­els, though that has soft­ened since its bat­tery fire sto­ry broke.

GM’s recov­ery has been help­ing the US Trea­sury sell off more of its shares – mak­ing $570M in recent stock sales means about $36B of its $51B loan has been paid off.

For the rest of this year, invest­ment ana­lyst firm Zacks expects auto­mo­tive stock val­ue to con­tin­ue see­ing strength in the fourth quar­ter. While Q3 of 2013 has seen some decline in earn­ings, that’s expect­ed to be more than off­set by an expect­ed 25.8% surge in earn­ings dur­ing Q4. Full year earn­ings are expect­ed to be around 9% for automak­ers.
Zacks expects indus­try rev­enue to grow by 3.4% in the Q4. It should be one of the very best sec­tors for stock investors.

CNN Mon­ey



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