Buy the Big Truck Auto Boost

by Jim Woods | July 3, 2013 9:15 am

Auto sales are booming, and June’s numbers leave us no doubt that both cars and trucks are back in a big way.

Thursday’s bullish U.S. sales figures for the prior month were much stronger than analysts were anticipating, and when all of the numbers come in, we could be looking at the best month for vehicles since the Great Recession.

On Tuesday, the Big 3 automakers reported outstanding year-over-year June sales gains, as Ford (F[1]) led the way with a 13.4% surge. Chrysler, which is majority-owned by Fiat (FIATY[2]), said sales jumped 8.2% during the month, while General Motors (GM[3]) saw a 6.5% boost.

The strong vehicle sales figures were largely the result of consumer demand for pickup trucks by both individuals and small businesses. The increased demand from the latter segment is, I think, an encouraging sign for the economy at large.


While the domestic automakers enjoyed a robust June, so did their Japanese counterparts. Honda (HMC[4]) saw total vehicle sales increase by 9.7% while Toyota’s (TM[5]) were slightly better at 9.8%. Nissan (NSANY[6]) was the big winner among the Japanese automakers, with a 12.9% June jump.

For investors, the booming auto sector is a chance to invest in companies with strong revenue supported by strong demand, and metrics driving the space, such as an aging vehicle fleet, low auto loan interest rates and growing consumer confidence.

Now, given the concentrated demand for pickup trucks, I think investors looking to ride the sector should concentrate on the two NYSE-traded U.S. companies that are killing it in the truck space — Ford and GM.

070313Ford 286x300 Buy the Big Truck Auto Boost
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When you consider that Ford more than 68,000 of its über-popular F-Series trucks in June, a metric that was up 24% from June 2012, you see what’s really revving the automaker’s sales. In fact, it was the best June for Ford truck sales since 2005. As for GM, sales of its Chevrolet Silverado models kept on trucking, rising 29% to 43,259.

The outstanding sales performance for the profitable truck segment is a trend not likely to slowdown anytime soon. According to Ford executives, demand for full-size pickups like the F-Series has grown three times faster than the overall industry since May[7]. Ford now expects pickup truck sales to eclipse the 2 million mark for the first time in six years.

I think that if you want to hitch your portfolio to auto stocks with the best chance of hauling shares higher, you should check out shares of full-size domestic pickup kings F and GM. Already this year, F shares are up about 20%, and GM shares have powered nearly 17% higher in 2013 … but there’s likely more upside to come in both stocks based on the continued fundamental strength, and the continued appetite from the buying public for big trucks.

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

Endnotes:
  1. F: http://studio-5.financialcontent.com/investplace/quote?Symbol=F
  2. FIATY: http://studio-5.financialcontent.com/investplace/quote?Symbol=FIATY
  3. GM: http://studio-5.financialcontent.com/investplace/quote?Symbol=GM
  4. HMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMC
  5. TM: http://studio-5.financialcontent.com/investplace/quote?Symbol=TM
  6. NSANY: http://studio-5.financialcontent.com/investplace/quote?Symbol=NSANY
  7. has grown three times faster than the overall industry since May: http://www.reuters.com/article/2013/07/02/autos-usa-sales-idUSL2N0F80T320130702?feedType=RSS&feedName=hotStocksNews&rpc=43

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