With global auto sales at 79.4 million units last year, auto stocks are essential to any portfolio consideration. But a changing dynamic broadens the investing landscape beyond just the traditional Detroit automakers.
Emerging markets such as India, the Middle East, Southeast Asia and Africa are seeing growing strength in the global auto market. Those areas on their own accounted for 24% of sales in 2022.
Meanwhile, traditional auto stocks in the U.S., Europe and China dropped partly because of difficulties getting enough semiconductor chips last year to satisfy the market.
That helped drive used car sales up to previously unseen levels, pricing some would-be buyers out of the market.
The semiconductor supply chain is improving, and I would expect the prices on auto stocks to fall as more vehicles are available to would-be buyers. So you can’t discount the traditional markets, just as you can’t rely on them as your only investment option.
I used the Portfolio Grader to evaluate auto stocks to pick out the best of the best based on factors such as momentum, recent performance and earnings performance. Here are seven to consider now.
Ford (F)
Ford (NYSE:F) is one of the best auto stocks out there.
It is already up 20% this year, and I think it’s destined to go higher when it reports second-quarter earnings on July 27.
Ford’s sales in the second quarter are up 11.2% from a year ago, with truck sales leading the way. Ford’s truck sales jumped 26.2% in the quarter.
One thing to keep in mind with Ford, however, is that it dropped the price of its F-150 Lightning electric vehicle.
While that should trigger an increase in sales, it would also likely lead to a corresponding drop in profit margin. And if it drops too far, the stock could take a hit.
Analysts still expect an earnings win for the second quarter, but the margins will tell the tale.
Also, remember that Ford nearly doubled its dividend earlier this year and now sports a 4.2% yield. F stock has a “B” rating in the Portfolio Grader.
General Motors (GM)
Another one of the big Detroit automakers, General Motors (NYSE:GM), is having a year much like Ford.
The stock is up nearly 17% this year and began a serious climb higher shortly after Memorial Day.
GM says it delivered nearly 672,000 vehicles in the second quarter, up 19% from a year ago, as supply chains eased for automakers. So far this year, GM has delivered 1.29 million vehicles. GM says it’s now seen four consecutive quarters of retail sales growth.
Battery supply chain disruptions continue to slow the sales of GM electric vehicles. GM reportedly closed an EV plant in Canada for a month because of a battery shortage.
The company has only one battery production plant, although it’s building two others in Tennessee and Michigan. Regardless, the company says that it expects to increase the velocity of EV production in the second half of the year.
GM reported revenue in the first quarter of nearly $40 billion, with a net income of $2.4 billion and a profit margin of 6%. Investors will look for the company to approach those numbers when it reports Q2 earnings on July 25.
GM stock has a “B” rating in the Portfolio Grader.
Stellantis (STLA)
Stellantis (NYSE:STLA) is a European automaker formed in 2021 from the merger of Fiat Chrysler and PSA Group.
So while you may not be familiar with Stellantis, you’ve undoubtedly heard of its iconic brands, including Dodge, Fiat, Jeep, Chrysler, Citroen and Peugeot.
With that kind of power, Stellantis produces a lot of vehicles. It has a target of 100% of its sales in Europe to be EVs by the end of the decade and 50% of its U.S. sales to be EVs. It owns the No. 3 EV in Europe (Fiat New 500) and the best-selling EV in France (Peugeot e-208.
Because it’s a European company, Stellantis reports earnings just two times a year. The most recent earnings report covering the second half of 2022 included revenue of $45.8 billion, up 19.25% from the previous year.
Income of 4.42 billion euros was also up 19% from a year ago, giving the company earnings per share of 1.40 euros.
STLA stock is up 30% in 2023 and has a dividend yield of more than 8%. It gets a “B” rating in the Portfolio Grader.
Honda Motor (HMC)
Honda Motor (NYSE:HMC) is the second-largest Japanese automaker by market cap, reaching $51.5 billion. But it does a lot more than just vehicles.
Honda also makes motorcycles, ATVs, lawnmowers, aircraft, outdoor motors and general purpose engines.
Overall, the company sold 27.3 million units of products in fiscal 2022 (from April 1, 2021 to March 31, 2022), including 572,000 vehicles, 200,000 motorcycles and 352,000 power products.
Overall brand sales in the second quarter were 347,000 units, up 40% from a year ago.
Earnings in the first quarter included revenue of 4.38 trillion yen ($30.9 billion), up 13.1% from a year ago. Earnings per share were 40.74 (29 cents) per share.
The company is also buying back $1.19 billion in shares in 2023 and announced plans to buy back another $1.4 billion in shares in 2024.
HMC stock is up 35% in 2023 and gets a “B” rating in the Portfolio Grader.
Kandi Technologies Group (KNDI)
Kandi Technologies Group (NASDAQ:KNDI) is a strict play on electric vehicles. The Chinese company is an EV and battery manufacturer that does most of its business in its home company.
But in the U.S., you can buy the Cowboy e10K heavy-duty vehicle, the Offroad K32 truck and the Lucky T9 all-terrain vehicle. It’s also building an impressive business in producing electric golf carts.
Kandi vehicles don’t have the same power or range as other EVs – for instance, the K32 has a maximum range of 50 miles and a top speed of 60 miles per hour. They have a niche market, for sure, because its vehicles are designed exclusively for off-road use.
And while Kandi is a relatively small company with a market cap of less than $300 million, the stock is showing impressive gains. KNDI stock is up 65% in 2023.
KNDI stock probably isn’t for everyone. But it’s an interesting way to diversify your automotive position. It gets a “B” rating in the Portfolio Grader.
China Automotive Systems (CAAS)
China Automotive Systems (NASDAQ:CAAS) makes power steering and other vehicle components.
Operating through 16 subsidiaries, it has 85 patents in China for power steering technology.
The company maintains relationships with more than 60 vehicle manufacturers to supply them with the components and power steering technology they need to outfit vehicles.
By becoming experts in a critical automotive feature and ensuring a large base of manufacturing customers, China Automotive appears to be a safe way to invest in auto stocks.
Earnings for the first quarter included revenue of $136.4 million, up 4.3% from a year ago. Income was $21.6 million with a profit margin of 15.2%, up from $14.7 million and 10.8% a year ago. Those are big numbers for a company with a market cap of only $154 million.
CAAS stock is down 11% this year but its growth story helps give it a “B” rating in the Portfolio Grader.
Dana Incorporated (DAN)
Headquartered in Ohio, Dana Incorporated (NYSE:DAN) makes axels, driveshafts, transmissions and other equipment for conventional, hybrid and electric vehicles.
It has relationships with many automotive and machine manufacturers, stretching its business to more than 30 countries.
In short, if you can’t decide which automotive stock will do well in the future, it makes sense to invest in a parts manufacturer that has a role in the industry’s success. Dana fits that bill as it builds the power systems that make vehicles go.
Earnings for the first quarter were $2.64 billion, up 6.6% from a year ago. EPS was 19 cents per share, up nearly 60% from last year’s quarter.
DAN stock is up 23% this year and has a “B” rating in the Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.