Amid some troubling global economic data, one industry group whose consistent outperformance has surprised many on Wall Street are the automakers. Post Great Recession, U.S. car sales have pushed forward, buoyed by the latest gadgetry and “go green” initiatives promoted by leading automakers.
Clearly, the efforts are having a strong effect in the marketplace. According to data from Ycharts.com, in 2014, total vehicle sales domestically averaged 16.84 million units per month and this year, automakers are on pace to hit 17.41 million — a 3.4% increase.
If recent trends are anything to go by, American automakers are enjoying the lion’s share of the industry renaissance. Last month, the top three most popular vehicles were all made in America — and were full-size pickup trucks to boot! Surprisingly, Toyota Motors’ (TM) venerable Camry model came in fifth place, with sales down almost 15% from a year prior.
Of course, every good story has an underlying conflict, and in the case of domestic automakers, there are things to be worried about.
We’ve seen a divergence between bullishness in revenue trends and volatility in financial markets. Shares of America’s leading automakers have been all over the map, leading many to ponder the long-term profitability of investment. And Volkswagen’s recent emissions scandal is dragging down U.S. automakers as well — presumably on fears that the “green” initiatives might have been less colorful than we thought.
We’ll take a look at three leading domestic automakers to see which ones will make it to the showroom floor.
Automakers: Ford (F)
One of the most iconic automakers in the world, Ford (F) is currently on a tear. The Ford F-series — a popular lineup of full-size pickup trucks — was ranked No. 1 in new vehicle sales for the month of August, with 71,332 units sold.
So dominant is Ford that the F-series bested its nearest rival offering by a 30% margin, and completely walloped the Toyota Camry — long considered the best-selling car in America — by nearly doubling its August results.
While many consumers rave about the F-series, recent investors of F stock have found little about which to be happy. Year-to-date, F stock is down 10% despite spending most of its time in positive territory. Ultimately, it was undone by the volatility in the broad markets, as well as the Volkswagen fallout.
Although, to be fair, F stock has had its own share of choppy trading conditions which would unnerve even the hardiest of Wall Street players.
The magnitude separating its 52-week high and low is 60% — great if you get the timing right but terrible otherwise. Even against the January opener of 2014, F stock is still in the red by 1.4%, confirming just how wild the ride has been.
Worse yet, since October of 2014 when F stock jumped beyond the $16.50 level, the bulls have failed to hold subsequent rallies for an appreciable length of time.
Although Ford continues to pump out hot-selling vehicles, F stock has been a poster child of inconsistency in the markets, and may not be suitable for most investors.
Automakers: General Motors (GM)
Hot on the tail of domestic rival Ford for the month of August, General Motors Co. (GM) has also been a beneficiary of the American automakers’ renaissance. Last month, its full-size pickup truck Chevrolet Silverado sold an impressive 54,977 units, up nearly 12% from a year ago.
But against an overall picture, the numbers are very clear. With over 2 million new vehicles sold YTD, General Motors is the king of automakers.
Still, GM stock has been driving a bumpy trail. Shares are down 15% YTD, with little evidence to suggest an imminent reversal in fortune. GM stock was up for most of the first half of 2015, buoyed by positive momentum in sales lifting a majority of automakers. However, as economic weakness in key emerging markets began to apply fundamental pressure, GM stock nosedived beginning in late June.
Three months later, GM stock has yet to recover.
Although shares have largely regained the market capitalization lost during last month’s panicked selling in the Dow Jones Industrial Average, GM stock is down nearly 18% against the June 23 session — right before global industry headwinds scared off Wall Street. Raising further questions is a bearish trend channel that developed in late December of 2013, characterized by lower highs and lower lows.
It may be a bull market for auto sales, but automakers’ equity shares aren’t feeling much love, and GM stock is no exception.
Automakers: Tesla Motors (TSLA)
The red-headed stepchild of the bunch, Tesla Motors Inc. (TSLA) happens to be one of the lucky few automakers whose shares are on a strongly positive trajectory for 2015, with an enviable YTD performance of nearly 19%.
What the company makes up for in sheer youth — it was founded in 2003 and TSLA stock’s initial public offering occurred seven years later — is agility of innovation, or finding new ways to fill demand.
The introduction of the Tesla Powerwall, a storage battery that potentially could harness enough power to run a house without the need to be on the bill of a utility company, may ultimately pave the way for true energy independence.
Tesla also demonstrated that it’s not just about wonkish tech-talk, with rumors circulating that the company will launch a ride-sharing app within five years to rival industry giant Uber. Considering the big business that is ride sharing, it’s no wonder that so many Wall Street fund managers have TSLA stock firmly locked in their portfolios.
While investors may be tempted to view TSLA stock as overbought due to its near 1,300% move since its IPO, the company is still on an upward trend line in the markets. Of the times when TSLA stock experienced severe volatility over the past year-and-a-half, shares bounced back strongly from technical support near the $180 level.
TSLA stock has also recovered all of its losses incurred during the recent Dow panic and then some — a statistic that neither F stock nor GM stock can currently claim.
Although Tesla is primarily known as being one of the most innovative automakers, its focus on utilitarian technology is what drives TSLA stock above the rest.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
