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The Best and Worst Auto Stocks to Drive Now

Japan, Germany, electric are where you should park profits

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When it comes to a barometer of the economy, there’s one sector that investors can look at to drive home current conditions. That sector is autos, and so far in 2012, the industry has been remarkably robust.

Year-to-date U.S. sales through June 30 are up nearly across the board, with the major manufacturers nearly all seeing big gains in total sales. Sales metrics in other top markets such as China also have been strong, and that’s helped defray the weakness in debt-ridden Europe.

What’s remarkable about the sales gains in the U.S. is that they’ve occurred despite an early year spike in gasoline prices, anemic GDP growth and persistently high unemployment.

But despite the revved-up first-half auto sales, a lot of knocks and pings remain on the biggest stocks in the sector. Because the market is a forward-looking mechanism, we’ve seen a decided lack of confidence in the future outlook for the sector’s behemoths. Conversely, there’s been a boom in Japanese, German and boutique automaker stocks, and that tells us that investors are willing to bet on autos making a comeback, and that serve a niche and/or growing market.

Here’s my list, ranked from worst to best, of auto stocks investors should drive now:

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