A new Jeep Grand Cherokee SRT or a Dodge Ram 2500 Laramie Longhorn? These are the two vehicles I’m contemplating purchasing next, a testament to how good Fiat Chrysler Automobiles (FCAU) brands have become over the past several years.
And apparently, I’m not the only one.
In fact, the Jeep and Ram pickup truck brands are revving up sales at the Fiat Chrysler, with Jeep Cherokee sales up about 45% year-to-date through the first nine months of the year. The über-profitable Ram pickup truck lines are up nearly 25% year-to-date through September. Overall, sales of all Fiat Chrysler brands have seen a sales rise of some 15% year-to-date.
For Fiat Chrysler, the resurgence of sales this year comes at a fortuitous time — just as FCAU stock begins its life on the New York Stock Exchange. In Monday trade, FCAU shares opened the session at $9 and then jumped to $9.55. That jump didn’t last long, however, as sellers came in and bid the shares down toward the end of the day in sympathy with the wider markets. FCAU finished is first day of trade at $8.92.
Monday was a milestone day for Fiat Chrysler, as it marked the first time the shares were publicly traded on a U.S. exchange since 2007, when they were under then-owner Daimler. After the tumultuous plunge in 2008 and 2009, and the subsequent government bailout, Italy’s Fiat began building its ownership in the Chrysler’s brands. Early this year, Fiat completed its purchase of Chrysler and now is 100% owner of the company.
Part of Fiat’s ownership plan was to take Fiat Chrysler public again similar to the way General Motors (GM) made its comeback to the NYSE years ago after its bailout and restructuring plan. Monday, one of the plan’s chief architects, Fiat Chrysler CEO Sergio Marchionne, drove his stock to New York City and parked it at the corner of Wall & Broad Street.
Now investors need to decide whether Fiat Chrysler stock should be part of their portfolios or whether it belongs on the side of financial road.
Answering this question with specificity depends largely on your investment goals, and whether you’re primarily a trader or a long-term investor.
I think that if you’re a trader, now is not the time to get behind the wheel of Chrysler stock. Although Marchionne and company have picked a good time to make their NYSE debuts in terms of Fiat Chrysler’s 2014 sales results, the company couldn’t have picked a worse time in terms of market volatility and market sentiment to start trading.
Considering that over the past 15 trading days have seen the Dow fluctuate more than 100 points intraday, each day, and that the S&P 500 now has plunged below its long-term support at the 200-day moving average, it seems as though Fiat Chrysler stock rode in right at the most inopportune time.
Over the long term, however, now may be a great time to get in on Fiat Chrysler stock.
In terms of a “hot” automobile brands, Jeep and Dodge are among the hottest in terms of car guy enthusiasm. Perhaps only boutique brand Tesla Motors (TSLA) is making vehicles with more car guy buzz than Jeep and Dodge right now. I suspect that the sales growth this year is just the beginning of continued resurgence in the Fiat Chrysler brands, which include European-centric models such as Alfa Romeo, Maserati and Ferrari.
According to Marchionne, Fiat Chrysler has its sights set on growing substantially over the next several years.
In a host of interviews with the media on Monday, the CEO said he thinks Fiat Chrysler can grow sales 60% to more than 7 million cars and trucks by 2018. Fiat Chrysler sold a total of 4.4 million cars and trucks in 2013. Although sales have been red hot, in terms of total sales Fiat Chrysler still is well behind Ford (F) at 6.3 million units sold in 2013, and way behind the biggest automaker on the block, Toyota (TM) with its nearly 10 million vehicles sold last year.
Finally, one thing long-term investors like to measure is valuation. On this front, Fiat Chrysler shares represent a sound buy. According to Marchionne, auto stocks in general are under valued. More importantly, data from FactSet on price to estimated earnings in both 2015 and in 2016, Fiat Chrysler stock is among the cheapest of all stocks in the auto sector.
If you currently have little or no exposure to auto stocks, now may be a great time to put some Fiat Chrysler stock into your portfolio’s garage.
As of this writing, Jim Woods was long TSLA.
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