The best auto stocks are those successfully navigating rough economic waters as investors look for safer opportunities. Amidst the geopolitical tensions, heightened inflation, and recessionary headwinds, the auto space is under major duress. The downturn is aggravated further by the intense competition in its niche. However, the savvy investor will want to pounce on the opportunity and wager on the best auto stocks offering robust upside potential ahead.
The automotive sector is far from the easiest sector to place your bets on. It’s a cyclical and capital-intensive industry that remains heavily unionized and competitive. On top of that, carmakers need to continue investing in new models in their efforts to outperform their rivals.
However, the current economic scenario has put the brakes on the sector’s growth trajectory, with more pain ahead given the ‘higher for longer’ narrative for interest rates. Nevertheless, with auto stocks trading at attractive levels, it’s an excellent time for investors to load up on some of the sector’s finest.
Ford (F)
Ford (NYSE:F) stands out as one of the most attractive stocks among traditional automakers. 2023 was a remarkably tough year for the business, with macro-headwinds and the United Auto Workers (UAW) strikes putting the brakes on F stock’s momentum. It now trades under 0.30 times forward sales estimates, more than 65% lower than the sector median.
However, on the financial front, things are looking up for its business. It posted a strong top-and-bottom-line beat in its first quarter (Q1), posting a healthy 3.2% year-over-year (YOY) growth in sales, reaching $42.8 billion. Moreover, its non-GAAP EPS of 49 cents per share beat estimates by five cents. The stellar growth in its top line was led by the success of its commercial wing in Ford Pro, which saw sales jump 40% in Q1.
Additionally, Ford is well-positioned to capitalize on the transition towards EVs and hybrids. Its hybrid models in particular, including the Escape, Maverick, and F-150, have witnessed a tremendous 36% increase in global sales. Moreover, in addition to its investment proposition, Ford’s management announced a special dividend of 18 cents per share, supplementing its regular 15-cent dividend.
BYD Company (BYDDF)
BYD Company (OTCMKTS:BYDDF) is a giant in the EV space that has established its position at the top of the heap. What sets it apart from its peers is its consistent performance and delivery, indicative of its robust, strong brand equity despite market headwinds.
It released another stunner of a deliveries report, where new energy vehicle sales increased by 38.1% in May to 331,817 units. This impressive increase is led by a strong 54.1% jump in plug-in hybrid electric vehicles (PHEVs), setting a new monthly record with 184,093 units sold. Additionally, battery electric vehicle (BEV) sales shot up 22.4%, reinforcing the firm’s powerful portfolio.
Beyond these numbers, BYD continues turning heads with its new offerings, such as the flagship “Shark” pickup truck, which rivals the Tesla (NASDAQ:TSLA) Cybertruck. Moreover, it plans to release a low-priced EV called the Seagull, effectively blending innovation and value.
General Motors (GM)
General Motors (NYSE:GM) is another titan in the global automotive space, and it continues to shine through its diversified operational framework spanning multiple segments. This strategy effectively shields it from market volatility while positioning it well to seize opportunities across various markets with aplomb.
In Q1, GM flexed its muscles again, posting an 8% increase in sales on a YOY basis to $43 billion. The uptick was led by discounts, with U.S. retail sales rising 6%. Additionally, its adjusted EPS witnessed a 19% jump from the prior-year period, indicative of its superior sales strategies and healthy profit margins.
Adding to its compelling bull case was its bold announcement late last year to increase shareholder rewards. Starting this year, it announced a whopping $10 billion accelerated share repurchase program and a 33% dividend increase. These heartening moves suggest that GM is looking to enhance investor returns and reinforce GM’s standing as a resilient leader in its niche.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
