The automotive sector and automotive stocks in general have been a mixed bag recently. Oil prices are holding steady which is good for selling cars, but after record sales the past few years, it’s only natural to have a dip eventually. And we are at that point.
But then President Trump comes into office and has the Environmental Protection Agency (EPA) review the guidelines it set on fuel efficiency. At this point, it appears that a lowering of the required miles per gallon standards starting in 2025 will happen.
With all of this mixed news, are automotive stocks a place you should be investing in right now? Is your money better served in other sectors like technology? While that sector is hot, there are some automotive stocks that are worth looking into. Here are 3 such stocks.
3 Automotive Stocks To Look Into
#1. Ford (NYSE: F)
One of the biggest automakers in the U.S., Ford is a solid company to invest in for the long term even with declining auto sales. The company recently reported a net profit of $1.6 billion and revenues of $36.5 billion, both of which beat analyst expectations. They also maintained their earnings outlook for 2017.
But what has many investors excited at Ford is ArgoAI. This is a joint venture between Ford, Alphabet and Uber to bring autonomous cars to market. What makes this venture so interesting is that it is attracting the top talent in the field. It does this by giving the developers a cut of the equity if they can deliver. As a result, people are expecting big things for ArgoAI.
Finally, for long term investors, Ford is paying a healthy 5.2% dividend which is easily sustainable for years to come.
#2. Renault (OTC: RNLSY)
Many U.S. investors who aren’t car buffs may not be familiar with Renault. But they are the largest auto maker in France and sell autos worldwide. While the bigger players in the auto sector get the headlines, Renault does its thing and continues to deliver.
The company recently reported earnings and increased revenues by 13%, operating profit by 38% and profit margins to 6.4%. The company has a long term plan to reach 7% profit margins and they are well on their way to achieving this goal.
The good news is that these increases in income and profitability are not expected to be short lived. The company sells a good number of automobiles in Brazil and Russia, which have seen large drops in numbers. The company expects sales to level off in 2017 in these countries and then slowly begin to rise again.
Another area where Renault does well is China. Auto sales there are not slowing down, only rising. So as sales in most of the countries Renault does business in rise, and sales stabilize in Brazil and Russia, the future looks very bright for this auto maker.
#3. Volkswagen (OTC: VLKAY)
Ask any investor in 2016 if they were investing in Volkswagen and probably all would say no. After the huge diesel scandal broke and fines were assessed, even the experts predicted that Volkswagen was doomed. Boy was everyone wrong.
While 2016 was a tough year for the automaker, Volkswagen is not dead. In fact, revenue is up 2% and they have become the largest auto maker in the world based on sales. Even better news is that the company took the initiative to cut operating costs a few years ago.
That plan is paying off as the company recently reported an increase in operating profit of 40%. As sales continue to turn around, the car maker will be earning a higher profit on each sale it makes.
The stock price is still nowhere near where it was before the scandal hit, but there is no reason why it won’t get back there as sales rebound and Volkswagen puts the scandal in its rearview mirror.
Automotive stocks have some hurdles to overcome as a whole. But just like with any industry, there are always some companies that are positioned better than others to survive turbulent times. The 3 stocks listed here are set up to sustain any short term issues and continue growing and are a good place to invest your money.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.