Auto Sales are Soaring, Why Aren’t the Stocks?

Could the great news already be baked in?

| More on:
The Motley Fool

One of the big business stories of the day is the recently released North American auto sales figures from August.  In a word, they were “spectacular”!

In the U.S., August was the best month for the industry in 6 years and 2013 sales are now on track to hit 16 million vehicles for the first time since 2007.

The story was similar on this side of the border as the seasonally adjusted annual sales rate hit 1.77 million vehicles in August.  The previous record for annual Canadian sales was 1.73 million.

But in the face of these uber-bullish headlines, the stocks of the two publicly traded North American OEMs, namely General Motors (NYSE:GM) and Ford (NYSE:F), as well as the Canadian auto-parts suppliers, are having nice, but relatively ho-hum days.

At the moment, GM and Ford are up 1.6% and 1.8% respectively, while Magna (TSX:MG), Martinrea (TSX:MRE), and Linamar (TSX:LNR) are each currently up 1.5%, 0.5%, and 0.1%.

What gives?

Today’s reaction by this collection of stocks could be an indication that the market is beginning to realize that it can’t get much better in North America for these companies.  Yes, business is booming, but these stocks have potentially priced most of this good news in.

In the table below, check out how each of the 5 stocks has performed over the past year:

Company Name

1 Year Performance

Magna

97.9%

Ford

79.8%

GM

68.0%

Linamar

67.1%

Martinrea

53.7%

S&P 500

18.0%

Source:  Google Finance

Each has substantially outperformed the S&P 500 over this period and while price appreciation alone doesn’t mean the run is ready to end, today’s reaction has to at least make one stop and wonder.

The auto industry is cyclical.  Today’s boom could be tomorrow’s bust.  For a smoother ride to riches, click here now and we’ll send you our special FREE report “3 U.S. Stocks That Every Canadian Should Own”.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.

Follow us on Twitter and Facebook for the latest in Foolish investing.

Fool contributor Iain Butler owns shares of Martinrea.  David Gardner owns shares of Ford.  The Motley Fool owns shares of 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.

More on Investing

Woman has an idea
Investing

3 Things About goeasy Stock Every Smart Investor Knows

Here are three things about goeasy stock that every smart investor knows or needs to know.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Dividend Stock Down 30% to Buy Right Now

Keyera is an energy infrastructure company that pays shareholders a forward yield of almost 6%. Is KEY stock a good…

Read more »

oil and natural gas
Dividend Stocks

Suncor Stock Is Rallying: Should You Invest?

Energy stocks like Suncor Energy Inc (TSX:SU) are rising with oil pries.

Read more »

A stock price graph showing growth over time
Investing

3 Growth Stocks That Could More Than Double Their Revenue by 2025

Three outperforming stocks with rising revenues are profitable options for growth investors.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, April 15

TSX investors may want to remain cautious, as any major update related to the ongoing Iran-Israel conflict could increase market…

Read more »

A worker gives a business presentation.
Dividend Stocks

TSX Communications in April 2024: The Best Stocks to Buy Right Now

Here are two of the best TSX communication stocks you can buy in April 2024 and hold for years to…

Read more »

Man holding magnifying glass over a document
Tech Stocks

Watching This 1 Key Metric Could Help You Beat the Stock Market

One key metric that Buffett looks at is the return on equity. Here's why you should watch it.

Read more »

Man considering whether to sell or buy
Dividend Stocks

Royal Bank of Canada Stock: Buy, Sell, or Hold?

Royal Bank of Canada (TSX:RY) has a high dividend yield. Should you buy it?

Read more »