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3 Auto Stocks That Survived the Sector Bloodbath in 2018
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The year 2018 has not been very rewarding for the auto sector as a whole. Let us take a look at how the auto sector has performed this year and what's in store for the sector in 2019.
A host of factors — including ongoing trade and tariff disputes, higher fuel price and rising interest rates — has hurt the auto stocks in 2018.
Disturbingly, this has happened at a time when the global automakers are investing hugely in alternative fuel and other niche technologies in order to abide by the stringent environmental regulations and to compete with new entities. Over the past year, the broader Zacks Auto sector has decreased 20.3%, whereas the Zacks S&P 500 composite declined by a meager 1%.
The changes in the consumers’ pattern towards the ownership of vehicles have been very prominent in 2018. Waning popularity of small passenger cars along with rising demand for crossovers, sports utility vehicles (SUVs) and trucks brought considerable changes in the business models of the automobile companies. This led to the opening of production plants and shutting of unviable plants by many top automakers, putting huge strain on their margins.
However, there have been silver linings too. A robust economy, low unemployment rate and strong consumers’ sentiments increased the demand for automobiles.
2019 Outlook for Auto Stocks
According to the leading rating agency Moody’s, outlook for the global auto industry over the next 12-18 months is stable, if not bright. The report adds that strong demand from emerging markets such as China, Russia, Brazil and India is likely to give huge impetus to the auto sector.
Moreover, with the possibility of trade truce between China and the United States, Beijing is likely to cut tariffs on auto manufacturing from 40% to 15%. With the chance of lower tariffs, U.S. automakers are likely to gain better access to China, the largest auto market in the world.
Stocks That Overpowered the Sector
Given this backdrop, it seems prudent to pick stocks that have beaten the sector as well as the S&P 500 composite stocks significantly over the past year. We have considered those auto stocks, which managed a price appreciation of at least 10% year to date.
We used the Zacks Stocks Screener to find three stocks with a Zacks Rank #2 (Buy) or better. Here are the stocks:
CarGurus, Inc. (CARG - Free Report) : This Cambridge, United States-based online automotive company is engaged in connecting buyers and sellers of new and used cars. Currently, the company has a Zacks Rank #2 The stock has risen 20.2% year to date.
Fox Factory Holding Corp. (FOXF - Free Report) : This Scotts Valley, CA-based company is engaged in designing, engineering, manufacturing and marketing of ride dynamics products worldwide. Currently, the company has a Zacks Rank #1 (Strong Buy). The stock has improved 68% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tesla, Inc. (TSLA - Free Report) : This Palo Alto, CA-based electric vehicles pioneer currently has a Zacks Rank #1. The stock has risen 17.8% year to date.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
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3 Auto Stocks That Survived the Sector Bloodbath in 2018
The year 2018 has not been very rewarding for the auto sector as a whole. Let us take a look at how the auto sector has performed this year and what's in store for the sector in 2019.
A host of factors — including ongoing trade and tariff disputes, higher fuel price and rising interest rates — has hurt the auto stocks in 2018.
Disturbingly, this has happened at a time when the global automakers are investing hugely in alternative fuel and other niche technologies in order to abide by the stringent environmental regulations and to compete with new entities. Over the past year, the broader Zacks Auto sector has decreased 20.3%, whereas the Zacks S&P 500 composite declined by a meager 1%.
The changes in the consumers’ pattern towards the ownership of vehicles have been very prominent in 2018. Waning popularity of small passenger cars along with rising demand for crossovers, sports utility vehicles (SUVs) and trucks brought considerable changes in the business models of the automobile companies. This led to the opening of production plants and shutting of unviable plants by many top automakers, putting huge strain on their margins.
However, there have been silver linings too. A robust economy, low unemployment rate and strong consumers’ sentiments increased the demand for automobiles.
2019 Outlook for Auto Stocks
According to the leading rating agency Moody’s, outlook for the global auto industry over the next 12-18 months is stable, if not bright. The report adds that strong demand from emerging markets such as China, Russia, Brazil and India is likely to give huge impetus to the auto sector.
Moreover, with the possibility of trade truce between China and the United States, Beijing is likely to cut tariffs on auto manufacturing from 40% to 15%. With the chance of lower tariffs, U.S. automakers are likely to gain better access to China, the largest auto market in the world.
Stocks That Overpowered the Sector
Given this backdrop, it seems prudent to pick stocks that have beaten the sector as well as the S&P 500 composite stocks significantly over the past year. We have considered those auto stocks, which managed a price appreciation of at least 10% year to date.
We used the Zacks Stocks Screener to find three stocks with a Zacks Rank #2 (Buy) or better. Here are the stocks:
CarGurus, Inc. (CARG - Free Report) : This Cambridge, United States-based online automotive company is engaged in connecting buyers and sellers of new and used cars. Currently, the company has a Zacks Rank #2 The stock has risen 20.2% year to date.
Fox Factory Holding Corp. (FOXF - Free Report) : This Scotts Valley, CA-based company is engaged in designing, engineering, manufacturing and marketing of ride dynamics products worldwide. Currently, the company has a Zacks Rank #1 (Strong Buy). The stock has improved 68% year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.
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Tesla, Inc. (TSLA - Free Report) : This Palo Alto, CA-based electric vehicles pioneer currently has a Zacks Rank #1. The stock has risen 17.8% year to date.
In addition to the stocks discussed above, would you like to know about our 10 top tickers to buy and hold for the entirety of 2019?
These 10 are painstakingly handpicked from over 4,000 companies covered by the Zacks Rank. They are our primary picks poised to outperform in the year ahead. Be among the first to see the new Zacks Top 10 Stocks >>