Should Investors Even Pay Attention to Auto Shows?

by Jim Woods | January 28, 2013 9:31 am

Should Investors Even Pay Attention to Auto Shows?

I love auto shows, and I suspect anyone who considers themselves even a casual “car guy” also loves the bling of the new models and the promise of futuristic concept cars on display at these big tent events.

During the past two weeks, the best of the auto industry was on display at the 2013 North American International Auto Show[1] — more commonly known as the Detroit Auto Show. The show was extremely well-attended, and one of the reasons why was the plethora of big reveals by so many of the world’s largest auto manufacturers.

For example, Ford (NYSE:F[2]) unveiled the “Atlas,” a smartly designed concept truck that is the template for the next generation of the workhorse — and company cash cow — F-150 pickup truck. Not to be outdone by Ford, rival General Motors (NYSE:GM[3]) came on strong with the next generation of its iconic Corvette sports car. The C7 “Stingray” features an all-new design that’s intended to appeal to both traditionalists and newbies to the high-performance brand.

Various other brands also made big reveals in the Motor City, including Toyota (NYSE:TM[4]) with its new Corolla Furia, as well as its luxury brand Lexus IS 350 F Sport; Honda (NYSE:HMC[5]) and its compact Urban SUV, as well as a new version of its luxury brand Acura MDX, and Volkswagen (PINK:VLKAY[6]) with its new sportier, faster and more youth-oriented version of its Passat model.

Of course, I am in the business of investing, and that means I also see auto shows through the prism of more than just a kid in a candy store. Yet while all of these new models and concept cars look downright gorgeous in the perfect lighting of Detroit’s Cobo Center, that doesn’t mean investors should buy a stock based on the bling.

In fact, when it comes to revenues that sustain the lifeblood of automakers, it’s usually the more boring models that can make or break a company’s bottom line.

In the case of Fiat’s (PINK:FIATY[7]) Chrysler, that company sells more Dodge Ram pickup trucks than any other model. Toyota’s bland mid-size Camry sedan is its top seller, while Honda sells more of its über-practical Civic model than anything else. GM might have a love affair with the Corvette, but its biggest seller by far is the Chevrolet Silverado pickup truck.

As for Ford, the F series pickup truck is its best seller. In fact, the F series is the best-selling vehicle in the United States — one reason why the company’s Atlas reveal was so closely watched by both consumers and investing types like me. Industry pundits and F-150 owners alike want to be sure the truck they love isn’t going to be tampered with for the worst.

In my opinion, both an F-150 owner and a market watcher, Ford hit the mark with the Atlas and the many fuel-saving changes and technological advancements that will surely make their way into the next generation F-150. Features such as an EcoBoost engine that employs start-stop technologies that enhance fuel economy, active grille and wheel shutters to improve the vehicle’s aerodynamic profile, as well as safety features such as a 360-degree point-of-view camera, are all designed to keep the F-150 out in front of the competition.

I think in the case of Ford, this year’s auto show reveal actually might be good for the stock because the company smartly chose to unveil likely improvements to its best seller.

As for the rest of the automakers, the answer remains to be seen if anything they trotted out will move their respective sales needles.

The bottom line here is that while automakers can make a big splash in the media by unleashing new models and concept cars at auto shows, these events are more intended to get car enthusiasts excited about buying. Think of it as a physical representation of “the dream” of cool car ownership.

Sometimes that dream can help the stock, but for the most part — when it comes to investing — it’s the pedestrian models that count.

So by all means, go to the auto show. Just make sure you go to have fun.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.

Endnotes:
  1. North American International Auto Show: http://www.naias.com/
  2. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  3. GM: http://studio-5.financialcontent.com/investplace/quote?Symbol=GM
  4. TM: http://studio-5.financialcontent.com/investplace/quote?Symbol=TM
  5. HMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMC
  6. VLKAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=VLKAY
  7. FIATY: http://studio-5.financialcontent.com/investplace/quote?Symbol=FIATY

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