With the market digesting all the tough news around us, it may be time to consider auto stocks to buy once the red ink subsides. It’s a speculative venture to be sure yet fortune favors the bold.
Fundamentally, automakers represent the economic rubber meeting the road, literally and figuratively. Yes, many components of the vehicle industry are discretionary; that is, people don’t need to buy a European luxury car with all the trimmings. Take such examples aside, though, and the reality is that personal transportation is a necessity.
In parts of the nation where public transportation is limited, not having your own car is a significant disadvantage. With that, these are the auto stocks to buy should the market incur a correction.
General Motors (GM)
When it comes to legacy automakers pivoting to electric vehicles, General Motors (NYSE:GM) may be one of the most credible. Sure, right now, with the EV sector fallout, the big dogs in the automotive industry are delaying their electrification plans. Instead, they’re moving toward what consumers want right now – hybrid electric vehicles.
Still, once the dust settles and EVs (hopefully) resume their upward trend, General Motors will be ready. In particular, I’m impressed with the company’s investment in its own battery system called Ultium. It’s also developed a platform to help churn out EVs that meet consumer tastes and standards.
Best of all, GM can “electrify” its popular combustion-based brands. It’s doing exactly that with the Hummer. It has many other opportunities to think about, including perhaps an all-electric Corvette one day.
Further, GM enjoys massive economies of scale. Combined with the longstanding brand awareness and power, it’s a credible forward threat in the EV arena. It’s definitely one of the auto stocks to buy for the long haul.
Toyota (TM)
Japanese automaker Toyota (NYSE:TM) really needs no introduction. As a company that has forged a reputation for quality and reliability, it continues to find ways to be relevant. What’s notable about Toyota is that unlike its peers, it didn’t go full bore into the EV race. It offered what some might call a half-hearted approach.
Turns out, that was the best thing to do. As CNN reported in March this year, Toyota’s hybrids have been crushing its rivals. The news agency notes that the company sold 11.2 million cars last year. That was more than any other automaker. Further, hybrids represented a third of that tally. Less than 1% were EVs.
Now, questions exist about whether this trend can continue. So long as infrastructural challenges in the EV ecosystem remain, I think Toyota has a winning platform on its hands. The company is giving customers what they want. And that’s a convenient vehicle that has some of the efficiency attributes of plug-in EVs.
Should a discount materialize, TM is one of the auto stocks to pick up.
Ferrari (RACE)
Obviously, Ferrari (NYSE:RACE) is a completely different animal compared to the other auto stocks. You’re not commuting in a Ferrari; no, you’re enjoying a religious experience that is accessible only to a select elite. However, because of this elitism, RACE makes for a compelling candidate for auto stocks, especially if it gets discounted.
Fundamentally, Ferrari should be insulated from economic woes. That’s not to say that RACE stock is immune from market pressures. Clearly, that’s not the case. However, Ferrari buyers aren’t fretting about their 401k account or other mundane anxieties. Indeed, from my understanding, you don’t actually buy a Ferrari. Instead, Ferrari buys you; that is, you must prove that you’re worthy of the privilege.
Such snobbery isn’t for everyone. However, this characteristic does bring resilience to the table. For instance, the company’s net margin stands at just under 21%. That’s better than almost 97% of the competition.
Of course, you must pay for such performance. RACE stock trades at 50.25X forward earnings and this metric isn’t getting cheaper on its own. So, should a correction materialize, be sure to put RACE on your radar.
On the date of publication, Josh Enomoto 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.
