Auto Sales Surprisingly Up in 2018: ETF & Stocks to Buy

Sweta Killa

Fri, Jan 4, 2019, 10:50 AM

In this article:

Though the U.S. auto industry faced tough times given higher interest rates, rising vehicle prices and threats of global slowdown in 2018, it proved resilient by registering another year of strong sales. This is especially true as car sales rose 0.6% to 17.3 million vehicles. This marks the fourth year of auto sales exceeding 17 million, the longest such streak the industry has ever recorded (read: 10 Top-Ranked ETFs That Crushed the Market in 2018).

Sales got one-time boost from Trump administration’s tax overhaul, which gave consumers extra amount to spend on new cars. Additionally, higher rental sales, fuel-efficient and technologically enriched vehicles, cheaper gas prices, high consumer confidence, and 50-year low unemployment led to resiliency in the industry. While sales of small sport utility vehicles rose strongly last year, sales of most other types of vehicles were either down or up only slightly.

Of the six major American and Japanese automakers, Fiat Chrysler FCAU is the only company that posted the sales increase of 9% last year. Other automakers recorded declines of 6.6% for Nissan Motor NSANY, 3.5% for Ford Motor F, 2.2% for Honda HMC, 1.6% for General Motors GM, and 0.3% for Toyota TM.

What Lies Ahead in 2019?

This year is expected to be more challenging given the lingering U.S.-China trade woes and signs of global slowdown, which will continue weighing on demand. Additionally, the effects of the tax cuts, especially for businesses buying fleets of cars, are expected to wane this year. Interest rates are set to climb higher as the Fed foresees two rates hike this year, making financing of new vehicles more expensive (read: Trump-Jingping Truce to Boost These ETFs).

The shift in consumers, preference from passenger cars to larger and more comfortable pickup trucks and SUVs, as well as longer usage of vehicles will also be a drag on sales. Further, the attractive loan deals that many car buyers rely on have started to disappear given that interest-free loans accounted for just 5.5% of all finance plans offered by dealers in December 2018. This was the lowest level for December since 2005, according to Edmunds.

Given the challenges ahead, Edmunds predicts the industry would sell fewer cars at 16.9 million (below 17 million mark) in 2019. Though the auto sector belongs to the bottom 7% of the Zacks Industry Rank, its valuation looks appealing at the current level with a P/E ratio of 7.97 — the lowest of all the 16 Zacks sectors.

In order to tap the bargain price, investors could take a look to the pure play ETF & few stocks that could be attractive picks this year:

First Trust NASDAQ Global Auto ETF CARZ

This fund offers pure play global exposure to 34 auto stocks by tracking the NASDAQ OMX Global Auto Index. It is moderately concentrated on the firms in its basket, with each making up for no more than 8.73% share. CARZ has a lower level of $21.7 million in AUM and trades in a small average daily trading volume of about 6,000 shares. The product charges 70 basis points (bps) in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see: all the Consumer Discretionary ETFs here).

BorgWarner Inc. BWA

This Michigan-based company is a global product leader in clean and efficient technology solutions for combustion, hybrid and electric vehicles. It saw positive earnings estimate revision of a penny for 2019 over the past 30 days reflecting year-over-year growth of 5.62%. It has a Zacks Rank #2 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PACCAR Inc. PCAR

This Washington-based company is a global technology company that designs and manufactures premium quality light, medium and heavy duty commercial vehicles sold worldwide under the Kenworth, Peterbilt and DAF nameplates. It saw positive earnings estimate revision of 13 cents for this year over the past 60 days, reflecting year-over-year growth of 1.33%. The stock has a Zacks Rank #2 and a VGM Score of B.

Genuine Parts Company GPC

This Georgia-based company is a distributor of automotive replacement parts in the U.S., Canada and Mexico. The stock has seen solid earnings estimate revision of 9 cents over the past 90 days for this year with an estimated earnings growth rate of 6.19%. It has a Zacks Rank #2 and a VGM Score of A (read: 4 ETF Gainers of 2018 That Can Keep Gaining in 1H19).

CarGurus Inc. CARG

This Massachusetts-based company is an online automotive marketplace connecting buyers and sellers of new and used cars. It saw positive earnings estimate revision of 7 cents over the past 90 days for this year and has an expected earnings growth rate of 30.95%. It has a Zacks Rank #2 and a VGM Score of B.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Biden Promised IRS Funding Wouldn't Increase Audits For Regular Americans As IRS Audits Poorest Americans 5X More Often Than Others
Once it was announced that the IRS would receive $80 billion in additional funding as part of the Inflation Reduction Act, the Biden Administration sought to assure regular Americans that these funds would not make them more likely to get audited by the agency. Treasury Secretary Jannet Yellen said that individuals and small businesses making under $400,000 a year would not see audit rates increase. A recent White House press release highlighted how much of the funds are "dedicated to closing th
Benzinga•23h ago
The Most Active Stock Trader in Congress Is Buying Shares of This Magnificent Stock-Split Stock
Wall Street's most-prominent stock-split stock of 2024 has been purchased on three separate occasions by a lawmaker who completed over 4,200 trades last year.
Motley Fool•8h ago
DJT Stock Jumps. The Truth Social Owner Is Showing Stockholders How to Block Short Sellers.
An FAQ on the Truth Social owner’s website gave stockholders multiple ways to avoid their shares being lent to short sellers.
Barrons.com•2h ago
My RMDs Start Soon So I Want to Convert $900k to a Roth, but I'm Getting Conflicting Info About Having to Wait 5 Years to Use the Money
People with Roth IRAs generally have to wait five years before withdrawing earnings from their account. But the devil is in the details, and for this particular rule, getting those details can be surprisingly difficult. For starters, the IRS has three different five-year rules that apply to Roth IRAs. One of them, the conversion rule, […] The post My RMDs Start Soon So I Want to Convert $900k to a Roth, but I'm Getting Conflicting Info About Having to Wait 5 Years to Use the Money appeared first
SmartAsset•4h ago
Google Fires 28 Workers Protesting $1.2 Billion Israeli Contract
(Bloomberg) -- Alphabet Inc.’s Google has fired 28 employees after they were involved in protests against Project Nimbus, a $1.2 billion joint contract with Amazon.com Inc. to provide the Israeli government and military with AI and cloud services.Most Read from BloombergDubai Grinds to Standstill as Flooding Hits CityElon Wants His Money BackSingapore Loses ‘World’s Best Airport’ Crown to QatarRecord Rainfall in Dubai? Blame Climate Change, Not Cloud SeedingRed Lobster Considers Bankruptcy to De
Bloomberg•4h ago
4 Members of Congress Generated Triple-Digit Returns in the Stock Market Last Year: These Are the 3 Stocks They Bought
These members of Congress delivered greater returns than Warren Buffett in 2023.
Motley Fool•7h ago
Lithium Americas Plunges After Shares Sold at Steep Discount
(Bloomberg) -- Lithium Americas Corp.’s stock plunged the most on record after agreeing to sell 55 million shares at a deep discount.Most Read from BloombergDubai Grinds to Standstill as Flooding Hits CityElon Wants His Money BackSingapore Loses ‘World’s Best Airport’ Crown to QatarRecord Rainfall in Dubai? Blame Climate Change, Not Cloud SeedingRed Lobster Considers Bankruptcy to Deal With Leases and Labor CostsShares of the lithium explorer fell as much as 27% to $4.82 as of 9:31 a.m. in New Y
Bloomberg•3h ago
The Fed’s probably going to hold rates steady for longer than expected. But even when that awaited rate cut comes, it may not be all that cathartic
Federal Reserve Chair Jerome Powell earlier this week said that inflation’s proving sticky and that “recent data have clearly not given us greater confidence.”
Fortune•5h ago
$93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom
Successful real estate investors have long followed the adage: When there is blood in the street, buy property. Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry. The management at Hines has been carefully watching
Benzinga•1h ago
4 Oil Pipeline Stocks to Gain From the Prospering Industry
Since midstream operations have lower exposure to volatility in commodity prices, the outlook for the Zacks Oil and Gas - Production & Pipelines industry is bullish. Kinder Morgan (KMI), Williams Companies (WMB), MPLX and Ultrapar (UGP) are the frontrunners in the industry.
Zacks•5h ago

News

Life

Entertainment

Finance

Sports

New on Yahoo

Yahoo Finance

Auto Sales Surprisingly Up in 2018: ETF & Stocks to Buy

Recommended Stories

Biden Promised IRS Funding Wouldn't Increase Audits For Regular Americans As IRS Audits Poorest Americans 5X More Often Than Others

The Most Active Stock Trader in Congress Is Buying Shares of This Magnificent Stock-Split Stock

DJT Stock Jumps. The Truth Social Owner Is Showing Stockholders How to Block Short Sellers.

My RMDs Start Soon So I Want to Convert $900k to a Roth, but I'm Getting Conflicting Info About Having to Wait 5 Years to Use the Money

Google Fires 28 Workers Protesting $1.2 Billion Israeli Contract

4 Members of Congress Generated Triple-Digit Returns in the Stock Market Last Year: These Are the 3 Stocks They Bought

Lithium Americas Plunges After Shares Sold at Steep Discount

The Fed’s probably going to hold rates steady for longer than expected. But even when that awaited rate cut comes, it may not be all that cathartic

$93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom

4 Oil Pipeline Stocks to Gain From the Prospering Industry