News last week that the United States and China would resume negotiations next month sent stocks sharply higher. Astute investors may grow tired from watching markets go up or down on hope alone. Even without any solid trade terms, anticipation of a resolution is powerful enough to move stocks. The automotive sector is a beneficiary of the two countries backing down from tariffs. Currently, China is imposing tariffs on the U.S. with Ford (NYSE:F) most likely to feel the impact.

Yet the trade war is not the only reason for investors to buy automotive stocks. Valuations are compelling and some of these companies reward investors with rich dividends.

There are seven automotive stocks that investors should buy.

Automotive Stocks to Buy: Ford (F)

Since peaking at $10.50 in July, Ford stock fell steadily and recently found a bottom at around $8.75. The company reported a weak quarter but the stock’s drop increased its dividend yield to 6.3%. Ford is not without issues. It is recalling 482,520 vehicles in the U.S. because the mechanism that controls how seat backs recline may have been improperly assembled. This news is not a setback: The company is acknowledging a problem and fixing it.

In July, the decline in automotive sales in China fell by just 4.3%. But with Ford still losing money in the region, the slowing decline is welcome news. In Q2, Ford said that it saw signs of stability in its business in China. Overall earnings before interest and taxes increased by 19%, supported by a broad-based improvement in market factors led by China, North America and Europe. In China, consolidated revenue grew 48% year-over-year driven by higher volumes of Ford’s Lincoln model. Additional initiatives that enhanced capabilities and stronger ties with joint venture partners will lead to stronger performance in the region.

Ford stock is worth over $11 if, using a five-year revenue exit model, investors assume revenue growing 1%-3% annually. Similarly, analysts have an average price target of $11.36. This target is achievable if Ford’s revenue rebounds in the quarters ahead.

General Motors (GM)

General Motors (NYSE:GM) shares may have bottomed recently below $36, as it trades currently in the $39 range. Investors flocked to the stock when trade tensions eased. The company reported Q2 results Aug. 1 and included a reaffirmed full-year earnings per share guidance of $6.50-$7.00 for the year. In the period, North American year-over-year results improved, led by growing truck sales. Average transaction prices and crossover delivers rose. Later this quarter, the start of the deliveries of the Silverado with an optional all-new Duramax turbo-diesel engine opens a new chapter in good fuel economy. And the unveiling of the 2020 Corvette Stingray to an audience of 300,000 should excite sports car enthusiasts.

GM’s Cadillac is in high demand, too. It sold more than 111,000 vehicles globally in the last quarter. It launched a new XT6 seven-passenger model in China and the U.S., giving it an edge over its competition in the high-growth, luxury SUV segment.

To align its workforce to demand, GM has jobs for every employee affected by the restructuring. So far, around 1,700 of the 2,800 employees accepted a transfer to plants that support the company’s growth segments. So, as the economic slowdown in China gets resolved, GM is in a good position to capture more market share while operating more profitably.

GM shares trade at fair value but the stock has a dividend yielding 3.9%.

Honda (HMC)

Honda (NYSE:HMC) shares bottomed at $23 in August and traded recently at $24.85. Valuations for HMC are even more compelling than for either F or GM stock. HMC stock has a dividend yielding 3.3% and a price-to-earnings ratio of 8.9. Last month, sales were at levels not seen in the company’s history. It also set multiple all-time monthly records. Truck sales and passenger car sales lifted total sales to 173,993, up 17.6% year-over-year. All segments performed well, including the CR-V, Passport, Accord and Civic. Even sales of the tiny-but-gas-efficient Fit grew 58% year-over-year.

In the first quarter, Honda reported a 0.7% drop year-over-year in revenue. Profits fell due to higher selling, general and administrative costs. Despite the weak quarter, higher research and development spending along with renewed demand should drive sales higher in the quarters ahead. On the balance sheet, higher operating margins from the motorcycle, financial services and automobile business should ensure that Honda meets full-year guidance.

Honda shares have a modest upside but also pays a 3.3% dividend yield that will keep investors happy. Cost reductions and favorable raw material pricing will also help the company meet its full-year 2020 targets.

Fiat Chrysler (FCAU)

Fiat Chrysler (NYSE:FCAU) shares may not have the same quality levels as a Ford or Honda, but investors are happy with the company’s prospects. The stock bottomed close to $12, trading recently just below $14. With a trailing P/E of 6, this stock is among the cheapest. If investors decide the stock is worth a valuation closer to its peers, then the stock might even get to the Wall Street average price target of $19.73.

FCAU stock is still enjoying a rally fueled by speculation the company is holding talks with Renault to merge. On paper, merging the two firms makes sense because a bigger company could compete more effectively. It could share costs and technology with Renault. Electric vehicle and autonomous vehicle development between the two firms would prevent the two from falling behind. Fundamentally, neither firm should be kept independent in the name of being a national asset. Both auto firms need a bigger resource pool to compete as global players. A merger should result in a better return on capital.

On the charts, FCAU stock is at the cusp of breaking out of a year-long downtrend. A definitive merger would send the stock back to yearly highs.

Toyota (TM)

Close to a 52-week high, Toyota (NYSE:TM) is not an ideal deep-value play. But at a trailing P/E of 8 and with a dividend yielding 3.3%, TM stock may still reward patient investors. In August, the company reported strong 12.3% growth on a volume basis, posting sales of 218,403 units. This is the best-ever August. Hybrid sales increased 68.3% in the Toyota division and 44.2% for the Lexus division, suggesting that investors benefit from the company’s diversification from gas-powered vehicles.

As the popularity of cars falls, Toyota is bucking the trend by reporting a 15.2% increase in Corolla sales. Highlander sales rose 21.7% while RAV4 sales were up 17.2%.

Just as Ford paired with Volkswagen in a joint venture and Fiat may merge with Renault, Toyota and Suzuki invested in each other. Toyota is buying a 5% stake in Suzuki while Suzuki will buy $453 million of TM stock. The companies will share costs related to the development of new technologies, and primarily, self-driving cars.

In its first-quarter earnings call, Toyota said it will address staff redundancies in the U.S. It will also reduce redundancy in accounting. To increase profit margin above the 8% level by the fiscal year 2021, it will increase the SUV/truck ratio. So long as customers demand such vehicle types, Toyota will adjust its product mix to meet their needs.

Navistar (NAV)

Navistar (NYSE:NAV) is not technically a car company. As a truck supplier, its strong Q3 report and analyst price target that is 22% above the recent $25.35 closing price are two reasons to consider this stock.

Navistar reported revenue growing 17% year-over-year, led by a 25% increase in truck revenue. Adjusted earnings before interest, taxes, debt and amortization rose 22% to $266 million. The adjusted EBITDA margin rose 8.7%, up from 8.4% last year. The company provided volume guidance for 2019 and 2020. While Class 6/7 and Class 8 units are both up in 2019, it will drop in 2020. Still, the company reaffirmed revenue of $11.3 billion -$11.8 billion.

Importantly, Navistar’s days sales inventory on-hand is on the decline. The normal range, established since 2014, is 80 days – 120 days. In July, it was at 85 days. The balance sheet remains strong, with manufacturing cash balance at $1.12 billion. It faces no debt maturities until the year 2025 when $1.6 billion is due.

NAV stock does not offer a dividend but Wall Street forecasts upside through the three recent “hold” ratings and one “buy” posted by analysts. Similarly, investors may input assumptions in a five-year discounted cash flow growth exit model to arrive at a higher fair value target.

Ferrari (RACE)

With a market capitalization of $37 billion, Ferrari (NYSE:RACE) is similarly sized to Ford but almost half the size of GM. Although the stock does not pay a dividend,it is growing at a healthy pace.

In the second quarter, Ferrari reported total shipments growing 8.4% year-over-year to 2,671 units. Revenue rose 6.8%, adjusted EBITDA was up 8.7% to $346 million and the EBITDA margin was 32%. The company benefited from an increase in V8 models shipped, offset by a drop in V12 models falling by a few units. Geographically, sales to China rose due to a decision to speed up client deliveries ahead of new emission regulations.

Ferrari confirmed its guidance will approach the high end of the range on all metrics.  Volume increase for the 488 Pista and 488 Pista Spider, Portofino and the 812 Superfast is driving demand for cars and spare parts. Higher sponsorship levels from Formula 1 racing activities is likely contributing favorably to the full-year results.

Ferrari does not need a dividend to increase shareholder value. It has a $1.65 billion multi-year share buyback program and will buy back $220.1 million in the second half of 2019. In the first half of the year, it bought back $165.5 million worth of shares.

RACE stock is the most expensive of the stocks discussed, with a P/E of 34 times. But it earned that valuation. Its clientele is buying more units, driving revenue higher.

As of this writing, Chris Lau held shares of F.