5 Auto Stocks to Buy & 5 to Sell as Markets Move Up
Zacks Investment Research | Jul 02, 2020 04:05AM ET
The markets are looking buoyant again with the Dow, S&P 500 and Nasdaq all showing strong double-digit gains since their pandemic lows. So investors may be wondering whether it’s a buyer’s market or a seller’s. As in every other market, this depends on your individual holdings and your specific entry points.
But there are also some common sense principles you can rely on that makes your choices more effective. Today, I’ve picked on one such principle and illustrated with stocks in the auto sector. I chose auto, simply because both good and bad is going on there, with RVs making a strong comeback as people take to road trips and safer holiday alternatives even as certain other areas drop in priority if only because of pandemic-induced thrift.
The principle I’m highlighting here is a quicker return to pre-pandemic business levels. Companies that are able to return quicker are obviously stronger positioned for the next two years than those that aren’t.
5 Stocks to Buy
Meritor (NYSE:MTOR), Inc. MTOR
Meritor is a manufacturer and supplier of automotive parts including integrated systems, modules and components for commercial and specialty vehicles worldwide. It has a leading position in most of its markets. Meritor serves a broad range of original equipment manufacturers (OEMs) worldwide, including commercial truck, trailer, military, bus and coach, other industrial OEMs and certain aftermarkets.
The shares carry a Zacks Rank #1 (Strong Buy). The 2021 EPS estimate of $2.10 is up 32.9% from the pre-pandemic 2020 estimate of $1.58. So it is expected to grow strongly from the pre-pandemic business levels next year, while those mentioned in the “To Sell” section below won’t.
The Shyft Group Inc. SHYF
Formerly known as Spartan Motors (NASDAQ:SHYF) Inc, The Shyft Group is a specialty vehicle manufacturing, assembly and upfit company serving the commercial, retail and service specialty vehicle markets. Operating through the Shyft Fleet Vehicles and Services and Shyft Specialty Vehicles segments, it serves vocations, federal, state, and local government entities. The company operates principally in Michigan, Indiana, Pennsylvania, South Carolina, Florida, Missouri, California, Arizona, Texas and Saltillo, Mexico.
The shares carry a Zacks Rank #1. The 2021 EPS estimate of $1.38 is up 15% from the pre-pandemic 2020 estimate of $1.20.
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Strattec Security Corporation STRT
Strattec Security Corp. designs, develops, manufactures and markets mechanical locks, electro-mechanical locks and related products for automotive manufacturers with operations in the U.S., Canada and Mexico. The company also produces precision zinc die castings for the transportation, security and small engine industries. The company's principal products are locks and keys for cars and trucks.
The shares carry a Zacks Rank #1. The 2021 EPS estimate of $1.56 is a huge jump from the pre-pandemic 2020 estimate of 29 cents.
Adient (NYSE:ADNT) PLC ADNT
Dublin, Ireland-based Adient plc, created from the separated automotive seating and interiors business of Johnson Controls (NYSE:JCI) International plc, is one of the world’s largest automotive seating suppliers. Adient now has relationships with the largest global auto manufacturers.
The shares carry a Zacks Rank #2. The 2021 EPS estimate of $1.76 is a huge jump from the pre-pandemic 2020 estimate of 7 cents.
BRP (NASDAQ:DOOO) Inc. DOOO
Valcourt, Canada-based BRP designs, develops, manufactures and distributes recreational vehicles. The company offers watercraft, sports boats, snowmobiles, pontoons, marine propulsion systems and all-terrain and utility vehicles, as well as engines for karts, motorcycles and recreational aircraft.
The shares carry a Zacks Rank #2. The 2021 EPS estimate of $2.11 is up 18.5% from the pre-pandemic 2020 estimate of $1.78.
5 Stocks to Sell-
Toyota Motor (NYSE:TM) Corporation TM
Japan-based Toyota is a leading automaker in terms of sales and production. It offers the full range of models from passenger cars and minivans to trucks and related parts and accessories. The company is also working on fuel cell and automated vehicles and plans to offer a committed electrified model or an electrified option for customers of Toyota or Lexus models by 2025.
Its current fiscal 2021 EPS estimate of $11.99 still lags the 2020 EPS estimate of $14.39 of 90 days ago. So the company isn’t currently expected to recover its pre-pandemic business levels until 2022.
PEUGEOT SA PUGOY
Peugeot (OTC:PUGOY) manufactures and sells passenger cars and light commercial vehicles under the Peugeot, Citroën and DS brands; automotive equipment including interior systems, automotive seating, automotive exteriors and emissions control technologies; retail financing to car customers and wholesale financing to dealer networks. It has operations across all continents except Australia.
The company isn’t expected to achieve pre-pandemic business levels until 2022 as its current EPS estimate of $2.23 for 2021 trails the 2020 estimate of $2.79 of 90 days ago by 20.1%.
Michelin (PA:MICP) MGDDY
Clermont-Ferrand, France-based Compagnie Generale des Etablissements Michelin manufactures and sells tires for all kinds of vehicles (for cars, two-wheel vehicles, trucks, construction machinery, tractors and aircraft), publishes maps, and guides and operates a number of digital services. It also sells car and bicycle accessories like pumps, manometers, bicycle helmets, hubcaps, replacement components for tires and transport accessories and other products like protective clothing, table tennis rackets and shoe insoles for road users.
The company isn’t expected to achieve pre-pandemic business levels until 2022 as its current EPS estimate of $1.14 for 2021 trails the 2020 estimate of $1.52 90 days ago by 25%.
Modine (NYSE:MOD) Manufacturing Company MOD
Modine manufactures and sells heat transfer equipment like heat exchangers for cooling all types of engines, transmissions, auxiliary hydraulic equipment and air conditioning components used in cars, trucks, farm and construction machinery and equipment, and heating and cooling equipment for residential and commercial building HVAC (heating, ventilating, air conditioning and refrigeration).
The company isn’t expected to achieve pre-pandemic business levels until 2022 as its current EPS estimate of $0.89 for 2021 trails the 2020 estimate of $1.19 90 days ago by 33.7%.
Gentherm (NASDAQ:THRM) Inc THRM
Gentherm develops and markets innovative thermal management technologies for a broad range of heating, cooling and temperature control applications. It offers products like heated seating, climate seating, electronics and cables for the automotive market. It is also building thermoelectric generators to capture the heat dissipated for conversion into electricity for various applications in automotive, industrial and materials sectors.
The company isn’t expected to achieve pre-pandemic business levels until 2022 as its current EPS estimate of $2.00 for 2021 trails the $2.19 2020 estimate of 90 days ago by 9.5%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
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