Look out: Auto stocks are back in the race
Before you ask, the answer is “no”- that is not the most cringe-worthy title that I could have come up with for this story. At least I didn’t include anything about “revving up”, “the long haul”, “the road to recovery”, or auto stocks “putting the pedal to the metal”.
But yes, as CNN’s Paul La Monica has pointed out, automotive stocks seem primed for a nice run (or “ride”, if you absolutely have to have a pun) after several years of bad news in the once-proud industry.
In fact, June was the best sales month the industry has had in several years, which is a far cry from the historic low that the auto industry was at when sales were just 10 million in 2009. Sure, even the forecasted amount of 16 million sales in 2014 would be less than the 17 million sales that were boasted before the financial crisis began.
Still, we’ll take what we can get at this point. Ford (F) and General Motors (GM) have succeeded, which is great news. Ford in particular has shown a surprisingly progressive attitude toward change, taking advantage of the growing market for smaller, more fuel-efficient vehicles. Meanwhile, there has also been growth in the used car market, with CarMax (KMX) seeing improved profits and planning to open stores at a clip of about a dozen per year in the next three years.
Furthermore, parts sales have been brisk, with AutoZone (AZO) and Johnson Controls (JCI) becoming viable options for many savvy traders. Johnson Controls in particular is notable for being the biggest supplier of car batteries in the world, which is exactly the kind of company that will continue to profit as the average age of American vehicles sits at 11 years.