Magna, A Play on U.S. Housing?

U.S. light vehicle sales are experiencing a boost from the ongoing rebound in U.S. housing.

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There are more direct routes to play a recovery in U.S. housing, but according to recent light vehicle sales, if you’re looking for an angle, Magna International (TSX:MG,NYSE:MGA) may just be it.

The recently released March U.S. auto sales report came out with the most attractive industry numbers since August 2007.  After bottoming out with annual sales below 10 million units, an annual pace of 15.3 million was achieved in March.  This is approaching the pre-recession range of 16-18 million units.

Pickup truck sales, driven by a recovery in U.S. housing and the booming oil and gas industry were behind the strong results.  All of those home builders that had been duck taping their rear view mirrors and living with dented side panels are beginning to feel comfortable enough in the housing recovery to go out and replace their old jalopies.

General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler sold a total of 154,722 full size pickups in March, up 14% from last year.  Magna touches many parts of the production process for the pickups of all 3 OEMS and therefore is in-line to benefit from strength in this area of the market.

GM was Magna’s largest customer in 2012, accounting for 18.5% of revenues.  Fiat/Chrysler was the second largest with 15% of 2012 revenues, and Ford was fourth with 12.5%.

Although the stocks aren’t reflecting it today, pickups are a highly profitable product and strong sales bode well for investors with exposure to this rebounding industry.

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Fool contributor Iain Butler owns shares of Magna International.  David Gardner owns shares in Ford. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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