In this article, we will take a look at the 11 best auto stocks to invest in. You can skip our comprehensive analysis of the automotive industry, go directly to the 5 Best Auto Stocks To Invest In.
The global automotive industry has undoubtedly been among the worst affected due to the Covid-19 pandemic amid the repeated lockdown restrictions this past year, causing an alarming decrease in vehicle manufacturing and sales. Sales in China plunged by 71%, in the United States by 41%, while the European automobile market experienced a staggering 80% drop in sales in what many consider the sharpest sales decline in multiple decades. Although the entire industry took a massive hit, the future is not so bleak. Research carried out by Moody’s predicts that the sales growth of the automotive industry will rise by 11.5% in 2021, while a survey conducted by the global consultancy group McKinsey revealed that the global consumer intent to purchases automobiles is close to pre-Covid-19 levels, with a significant focus on Electric Vehicles.
The rise of automotive corporations centered around EVs and a global push to combat greenhouse gas emissions by taxing automakers has caused traditional car manufacturers to shift towards cleaner energy options. The $1.74 billion European Green Vehicles Initiative aids in this endeavor. With consumers being increasingly aware of automobile sustainability, Electric vehicle sales have propelled up by 43% in 2020, thus pushing the industry towards cleaner, electric automobiles. In a Deloitte Global Automotive Consumer Study conducted in 2020, 21% of the total respondents in the United States were planning on purchasing a hybrid or battery electric vehicle.
Some of the top automotive stocks include General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and NIO Inc. (NYSE:NIO), among other discussed in detail below.
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Our Methodology
Let us now analyze our list of the 11 best auto stocks to invest in. We took into account hedge fund sentiments, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks.
Why should we pay attention to hedge fund sentiment while choosing stocks?
Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Best Auto Stocks To Invest In
11. Honda Motor Co., Ltd (NYSE:HMC)
Number of Hedge Fund Holders: 10
Honda Motor Co., Ltd. (NYSE:HMC) is a Japanese multinational automobile manufacturer that designs and sells cars, trucks, motorcycles, and power equipment. Founded in 1946, Honda Motor Co., Ltd (NYSE:HMC) ranks eleventh on the list of the 11 best auto stocks to invest in.
At the end of the second quarter of 2021, 10 hedge funds in the database of Insider Monkey held stakes worth over $374.9 million in Honda Motor Co., Ltd (NYSE:HMC). This is compared to 12 hedge funds in the previous quarter with stakes worth approximately $432.8 million.
Honda Motor Co., Ltd (NYSE:HMC) will soon start launching its vehicles fitted with the Google Android Automotive operating system, a car system that includes a number of car-approved Android applications, including a voice-activated Google Maps assistant. The first of these cars will become available next year, according to the automotive company.
Out of the hedge funds being tracked by Insider Monkey, Jim Simons’ investment firm Renaissance Technologies is one of the leading shareholders in the company with 2.5 million shares worth more than $81 million.
Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and NIO Inc. (NYSE:NIO), Honda Motor Co., Ltd (NYSE:HMC) is one of the best auto stocks to invest in.
10. Toyota Motor Corporation (NYSE:TM)
Number of Hedge Fund Holders: 12
Toyota Motor Corporation (NYSE:TM) is one of the world’s largest automotive manufacturers. Based in Aichi, Japan, the firm makes regular cars, hybrid cars and more recently, electric cars as well, with total vehicle production reaching 10 million per year. Ranked tenth on the list of the 10 best auto stocks to invest in, Toyota Motor Corporation (NYSE:TM) has a market capitalization of $290.52 billion.
At the end of the second quarter of 2021, 12 hedge funds in the database of Insider Monkey held stakes worth over $903 million in Toyota Motor Corporation (NYSE:TM). This is compared to 18 hedge funds in the preceding quarter with stakes worth approximately $824 million.
On March 30th, Citi analyst Arifumi Yoshida resumed coverage on Toyota Motor Corporation (NYSE: TM) with a Buy rating.
Out of the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Toyota Motor Corporation (NYSE:TM) with 4.63 million shares worth more than $810 million.
Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and NIO Inc. (NYSE:NIO), Toyota Motor Corporation (NYSE:TM) is a notable auto stock to invest in.
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 19
XPeng Inc. (NYSE:XPEV) is a Chinese vehicle manufacturer headquartered in Guangzhou. The company engages in the design, manufacture and distribution of smart electric vehicles, alongside the provision of vehicle maintenance services. The electric vehicle maker ranks ninth on our list of the 11 best tech stocks to invest in.
On August 26, XPeng Inc. (NYSE:XPEV) released its second quarter earnings report for 2021. The company declared earnings per share at -$0.21, beating estimates by $0.03. The reported revenues for the quarter came in at $580.32 million, surpassing estimates by $64.77 million.
At the end of the second quarter of 2021, 19 hedge funds in the database of Insider Monkey held stakes worth over $784.6 million in XPeng Inc. (NYSE:XPEV). The number of hedge funds that held stakes in the company remained unchanged in both, the first and second quarters of 2021.
On October 1, BofA analyst Ming Hsun Lee raised his price target on XPeng Inc. (NYSE:XPEV) to $63 from $61 and kept a Buy rating on the shares, simultaneously predicting a revenue increase in the upcoming years for the company.
Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and NIO Inc. (NYSE:NIO), XPeng Inc. (NYSE:XPEV) is one of the top auto stocks to invest in.
8. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 20
Li Auto Inc. (NASDAQ:LI) is a Chinese electric vehicle manufacturer based in Beijing. Specializing in the design and production of electric vehicles, it’s most famous product is the Li ONE, a large premium six-seat electric SUV. Ranked eighth on the list of the 11 best auto stocks to invest in, Li Auto Inc, (NASDAQ:LI) has a market capitalization of $27.96 billion.
At the end of the second quarter of 2021, 20 hedge funds in the database of Insider Monkey held stakes worth $457.4 million in the vehicle manufacturer, up from 18 in the preceding quarter worth $493.8 million.
On August 30, Li Auto Inc. (NASDAQ:LI) issued its quarterly earnings report for the second quarter of 2021. The reported EPS was at -$0.01, missing market estimates by $0.01. On the other hand, the declared revenues of $779.14 million surpassed estimated revenues by $69.07 million.
On August 31, BofA analyst Ming Hsun Lee raised the his price target on Li Auto Inc. (NASDAQ:LI) to $42 from $39 and kept a Buy rating on the shares after the company announced its second quarter results.
Just like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), Ford Motor Company (NYSE:F) and NIO Inc. (NYSE:NIO), Li Auto Inc. (NASDAQ:LI) is one of the best auto stocks to invest in.
7. Ferrari N.V (NYSE:RACE)
Number of Hedge Fund Holders: 27
Ferrari N.V (NYSE:RACE) is an Italy-based designer, manufacturer and retailer of luxury performance sports cars. Active in over 60 markets worldwide, Ferrari N.V (NYSE:RACE) comes in at seventh on the list of the 10 best auto stocks to invest in.
The company issued its quarterly earnings report for the second quarter of 2021, with reported earnings per share at $1.32, crossing the estimated EPS by $0.13. The company also reported revenues of $1.23 billion, an increase of 82.85% on a year-over-year basis, although falling short of the estimated revenue by $35.89 million.
At the end of the second quarter of 2021, 27 hedge funds in the database of Insider Monkey held stakes worth over $992.8 million in Ferrari N.V (NYSE:RACE). This is compared to 26 hedge funds in the preceding quarter with stakes worth approximately $1.25 billion.
On September 19, Oddo BHF began coverage of Ferrari N.V (NYSE:RACE) with an Outperform rating and $257 price target.
In the Q2 2021 investor letter of Ensemble Capital, the fund stated some of the issues the company faced these past few quarters, as well as its fantastic production during the pandemic. Here is what the fund said:
“Ferrari: After posting standout performance in 2020, beating the S&P 500 by over 20%, Ferrari’s share price performance has lagged for much of this year. The main issue this quarter was the company pushing out their medium-term financial targets due to development and production delays caused by COVID, but this only led to a 1% decline in the stock price for the full quarter. While we believe the company did a fantastic job maintaining production in light of COVID, it did not surprise us that some of their longer-term, new model introductions might be delayed by a couple of quarters. While disappointing of course, Ferrari is curating a set of extremely exclusive mechanical works of art and we are much happier seeing them take the time to do things right, rather than rushing to meet a self-imposed financial target.”
6. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 34
NIO Inc. (NYSE:NIO) is a multinational automobiles manufacturer based in Shanghai. The company specializes in the development of electric vehicles. NIO Inc. (NYSE:NIO) has a market capitalization of $60.25 billion, and is ranked sixth on the list of the 10 best tech stocks to invest in.
By the end of the second quarter of 2021, 34 hedge funds out of the 873 tracked by Insider Monkey held stakes in NIO Inc. (NYSE:NIO) worth more than $2.06 billion. This is compared to 28 hedge funds in the previous quarter with a total stake value of approximately $1.32 billion.
On August 11, NIO Inc. (NYSE:NIO) issued its earnings report for the second quarter of 2021, with reported earnings per share at -$0.06, surpassing market estimates by $0.05. In addition to this, the company generated revenues of $1.30 billion, beating estimated revenues by $12.26 million.
On September 26, HSBC analyst Yuqian Ding reiterated a Buy rating on Nio, but lowered his price target to $47 from $69. However, the new price target still presents a significant upside compared to today’s stock price of about $33.
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Disclosure: None. 11 Best Auto Stocks to Invest In is originally published on Insider Monkey.
