Despite the auto industry’s cyclical nature, it consistently attracts investors for stable, long-term gains. You can add stability to your portfolio by choosing the best auto stocks to buy now.
In recent years, we’ve seen how the top automakers have embraced the EV transition, adding a dynamic new layer to their operations. However, not all businesses are going all-in on electric.
Many companies continue to advance a hybrid strategy, which pays dividends as the approach effectively caters to a wider range of consumer preferences. It also lets them demonstrate flexibility during a downturn. The positive results of a hybrid strategy have become more pronounced lately, given the slowdown in the EV market.
That said, here are three auto stocks to buy. These companies boast strong fundamentals and excellent long-term upside potential. Moreover, they stand out for their superb bottom-lines, which have held firm despite the economic headwinds.
Auto Stocks to Buy: Toyota (TM)
Toyota (NYSE:TM) is a true paragon of Japanese engineering and one of the forerunners in the automotive niche. The firm has effectively navigated the shift to hybrids and EVs to strengthen its market positioning further. Hence, TM stock is an essential addition to your portfolio for those who view hybrids as the near-term future and EVs as tomorrow’s horizon.
It has been over a year since Toyota CEO Akio Toyoda resigned, labeling himself too traditional for the EV shift. Despite this, Toyota continues to focus on hybrid models rather than fully commit to EVs. This strategic approach has proven lucrative at a time when the EV pure-plays struggle.
Toyota led global auto sales at 11.2 million vehicles last year, with hybrids making up a third of these sales. Moreover, in its most recent quarterly showing, it posted a whopping $71.1 billion in sales, beating estimates by $6 billion. To put things in perspective, it was the 16th consecutive quarter where the firm blew past top-line results.
Li Auto (LI)
Li Auto (NASDAQ:LI) is one of the best Chinese EV plays but has lost a ton of value, dropping over 50% year-to-date. Hence, for those looking for post-interest rate cut plays, it might be an excellent time to pounce on LI stock at current levels.
What separates Li Auto from its peers is its superior margin profile. It has been consistently profitable on a gross margin basis since 2020. Moreover, from a sizeable loss of $292 million in 2022, the firm snapped back to post a net income of $1.65 billion last year. This resilience has plenty to do with its operational efficiencies and commitment to creating user value,
Moreover, Li Auto boasts a robust financial position, backed by $13.7 billion in cash reserves and an impressive vehicle margin of 19.3% in Q1. Additionally, it’s gearing up to deliver level 3 autonomous driving technology in 2025 and plans to expand into the Middle East market.
General Motors (GM)
General Motors (NYSE:GM) is a legacy automaker that smoothly steers its business toward EV and autonomous driving technologies. This is shown by the stable growth in its top-and-bottom-line results and its attractive shareholder rewards program. Following its strong Q1 showing, it announced a new $6 billion stock repurchase plan, signaling strong confidence in its future.
Revenues surged 7.6% to $43 billion YOY, with a diluted EPS of $2.62 that beat last year’s figures by 18.6%. Additionally, the firm has bumped its full-year earnings outlook despite adjusting its all-electric vehicle production targets. It aims to produce 200,000 to 250,000 units this year behind the upper-end of its previous estimate of 300,000. GM aims to match volume with demand, as it gears up for profitability as soon as the fourth-quarter (Q4) of 2024.
Furthermore, GM is channeling its healthy cash flows into critical growth areas, notably through a joint venture with LG Chem to build battery factories in North America. This strategic partnership is set to fortify GM’s position in the EV space in securing critical components for its supply chain.
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.
