In this article, we discuss 13 best car stocks to invest in. If you want to skip our discussion on the auto industry, head over to 5 Best Car Stocks To Buy Right Now.
Fitch Ratings’ 2024 outlook for the global auto manufacturing and supply sector is neutral. Fitch forecasts improved supply chains boosting global vehicle production, but overall sales are expected to be hindered due to less robust economic conditions, particularly in the US and China. Fitch predicts a 4% increase in global sales and production in 2024. Fitch also foresees slower economic growth and higher interest rates impacting overall vehicle demand in 2024. Despite this, the existence of pent-up demand resulting from years of industry underproduction is likely to bolster sales. The normalization of vehicle pricing and product mix is expected to attract customers who were previously priced out of the market. Vehicle production has been operating at or slightly above recessionary levels for nearly three years. While Fitch does not anticipate a sales decline, sales are expected to remain below pre-pandemic levels.
S&P Global Mobility predicts 88.3 million new vehicle sales globally in 2024, anticipating a 2.8% year-over-year increase in global new light vehicle sales. The recovery in light vehicle output continues, driven by supply chain improvements and recovering demand, particularly from pent-up consumer demand. However, S&P Global Mobility expresses caution about the recovery’s sustainability due to challenges such as elevated vehicle pricing, difficult credit and lending conditions, and consumer confidence fluctuations. The forecast takes into account factors like persistent interest rates, supply chain improvements, affordability issues, high vehicle prices, varying consumer confidence, concerns about energy prices and supply, auto lending risks, and challenges associated with ongoing electrification efforts. Colin Couchman, executive director of global light vehicle forecasting for S&P Global Mobility, commented:
“2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment. A major concern is how ‘natural’ EV demand will fare as governments consider scaling back interventionist policy support – especially for incentives and subsidies, industrial policy, and OEM planning targets.”
In 2024, the automotive industry is experiencing shifts in trends. The electrification of vehicles, a dominant theme, faces a reality check as consumer adoption of electric vehicles (EVs) in North America slows down, signaling a more extended journey for widespread acceptance. Meanwhile, autonomous technologies are advancing, with Level 3 conditional driving automation being adopted on certain vehicles. Chinese and Indian automakers are making strides in international markets like the EU, US, and Africa, challenging established brands like Toyota and Volkswagen. Economic uncertainties are influencing consumer spending, leading to increased demand for used cars and extended ownership of existing vehicles. The car-as-a service (CaaS) model is emerging as an alternative to traditional leasing, offering subscription-based programs with potential long-term commitments. Additionally, micro-mobility, represented by electric scooters, bicycles, and e-bikes, is gaining popularity as a cost-effective and convenient mode of transportation for short urban trips. These trends collectively signify a transformative period in the automotive industry.
Investors looking to put their money in the automotive sector can buy stocks like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F).
Our Methodology
We chose the top auto stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 933 elite hedge funds tracked as of the end of the fourth quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).
A modern car on a highway, its wheels reflecting the setting sun.
Best Car Stocks To Buy Right Now
13. Asbury Automotive Group, Inc. (NYSE:ABG)
Number of Hedge Fund Holders: 33
Asbury Automotive Group, Inc. (NYSE:ABG) is an American automotive retailer that provides new and used vehicles, vehicle repair and maintenance services, replacement parts, and collision repair services. On February 8, Asbury Automotive Group, Inc. (NYSE:ABG) reported a Q4 non-GAAP EPS of $7.12, missing market consensus by $0.47. The revenue climbed 2.7% year-over-year to $3.8 billion, outperforming Wall Street estimates by $100 million.
According to Insider Monkey’s fourth quarter database, 33 hedge funds were bullish on Asbury Automotive Group, Inc. (NYSE:ABG), compared to 30 funds in the prior quarter. David Abrams’ Abrams Capital Management is the largest stakeholder of the company, with 2.10 million shares worth $474.35 million.
Like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F), Asbury Automotive Group, Inc. (NYSE:ABG) is one of the best auto stocks to monitor.
Bonhoeffer Capital Management stated the following regarding Asbury Automotive Group, Inc. (NYSE:ABG) in its fourth quarter 2023 investor letter:
“Our broadcast TV franchises, leasing, building products distributors and dealerships, plastic packaging, and roll-on roll-off (“RORO”) shipping fall into this category. One trend we find particularly compelling in these firms is growth creation through acquisitions, which provides synergies and operational leverage associated with vertical and horizontal consolidation. The increased cash flow from acquisitions and subsequent synergies are used to repay the debt and repurchase stock; and the process is repeated. This strategy’s effectiveness is dependent upon a spread between borrowing interest rates and the cash returns from the core business and acquisitions. Over the past 12 months, interest rates have been increasing, which has reduced the economics of this strategy; but a large spread still exists if assets can be purchased at the right price. Increasing interest rates have affected the returns on public LBO firms. Some firms have been reducing debt to reduce the impact of higher rates on earnings.
Asbury Automotive Group, Inc. (NYSE:ABG), a US-based automobile dealer group, a portfolio holding, is an example of a private LBO. Given Asbury’s current valuation of an 18% earnings yield and, more importantly, a five-year forward earnings yield of 38%, buybacks are accretive. Management has developed a long-term plan that includes acquisitions and operational leverage from internet sales and prepaid service plans. The net income annual growth is expected to be 25% over the next two years based upon management’s plan. Holding the current modest 6 times multiple of earnings constant, the rate of earnings growth implies a 25% total return…” (Click here to read the full text)
12. Stellantis N.V. (NYSE:STLA)
Number of Hedge Fund Holders: 33
Stellantis N.V. (NYSE:STLA) is a global company involved in the design, engineering, manufacturing, distribution, and sale of automobiles, light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems. Stellantis N.V. (NYSE:STLA) is one of the best auto stocks to buy.
On February 15, Stellantis N.V. (NYSE:STLA) declared a €1.55 per share annual dividend, a 15.7% increase from its prior dividend of €1.34. The dividend is payable on May 3, to shareholders on record as of April 23. Stellantis N.V. (NYSE:STLA) also plans to implement a €3 billion open-market share buyback program in 2024.
According to Insider Monkey’s fourth quarter database, 33 hedge funds were long Stellantis N.V. (NYSE:STLA), compared to 27 funds in the prior quarter. Karthik Sarma’s SRS Investment Management is the largest stakeholder of the company, with 8.4 million shares worth $197.4 million.
Miller Value Partners Income Strategy made the following comment about Stellantis N.V. (NYSE:STLA) in its second quarter 2023 investor letter:
“We initiated a starter position in Stellantis N.V. (NYSE:STLA), which makes Jeep, Dodge and Fiat cars. The company has a nearly 8% dividend yield with enough net cash (cash minus debt) on the balance sheet to cover the dividend for almost five years. The company trades at 1.7x operating profits, which means the market is already expecting a likely drop in cash flow. Still, the shares appear to be worth meaningfully more than where they trade, and management is heavily aligned with stockholders with a 14% stake. They share our view that the valuation is compelling, as the company plans on repurchasing ~3% of shares outstanding this year.”
11. Gentex Corporation (NASDAQ:GNTX)
Number of Hedge Fund Holders: 33
Gentex Corporation (NASDAQ:GNTX) specializes in designing, developing, manufacturing, and supplying digital vision, connected car, dimmable glass, and fire protection products globally. On January 26, Gentex Corporation (NASDAQ:GNTX) reported a Q4 GAAP EPS of $0.50 and a revenue of $589.1 million, outperforming Wall Street estimates by $0.05 and $26.93 million, respectively. Revenue for the quarter increased 19.3% compared to the same period last year. The revenue for the fourth quarter of 2023 incorporated one-time cost recoveries of around $5 million.
According to Insider Monkey’s fourth quarter database, 33 hedge funds were bullish on Gentex Corporation (NASDAQ:GNTX), compared to 32 funds in the prior quarter. John W. Rogers’ Ariel Investments is the leading stakeholder of the company, with 6.5 million shares worth $214 million.
Here is what Ariel Fund & Ariel Appreciation Fund has to say about Gentex Corporation in its Q3 2021 investor letter:
“During the quarter, we added leading supplier of automatic-dimming mirrors for the automotive industry, Gentex Corporation (GNTX), to Ariel Fund and Ariel Appreciation Fund. With over 90% market share and a long history of technological innovation and manufacturing capability, the company consistently outgrows the broader industry, produces best-in-class operating margins, and generates attractive free cash flows. Recently, the stock has underperformed due to broad-based supply chain concerns and the disruption of global automotive production. We view these worries as overblown and see this as an opportunity to own a high-quality, niche franchise with excellent and improving growth prospects, well-positioned to benefit from growing market adoption of its essential technologies.”
10. AutoNation, Inc. (NYSE:AN)
Number of Hedge Fund Holders: 34
AutoNation, Inc. (NYSE:AN) is an American automotive retailer operating through three segments – Domestic, Import, and Premium Luxury. AutoNation provides a variety of automotive products and services, including new and used vehicles, automotive repair and maintenance, wholesale parts, collision services, and automotive finance and insurance products. It is one of the best auto stocks to watch. On February 13, AutoNation, Inc. (NYSE:AN) reported a Q4 non-GAAP EPS of $5.02 and a revenue of $6.8 billion, outperforming Wall Street estimates by $0.15 and $120 million, respectively.
According to Insider Monkey’s fourth quarter database, 34 hedge funds were bullish on AutoNation, Inc. (NYSE:AN), compared to 38 funds in the last quarter. Anand Parekh’s Alyeska Investment Group is the largest stakeholder of the company, with 604,684 shares worth $90.8 million.
Here is what Bonhoeffer Capital Management has to say about AutoNation, Inc. (NYSE:AN) in its Q1 2023 investor letter:
“AutoNation has followed an organic growth and buyback strategy versus a consolidation strategy. All of the firms have had a reduction in PE over the last 10 years. The question is: will these historical trends continue? There is a large TAM for continued consolidation, and given the PEs (6-8x earnings) today, buybacks will be accretive to all of these firms. I think the historical trends are intact and will continue into the future; thus, I am bullish on growth for the consolidation-focused automobile dealers.”
9. Lear Corporation (NYSE:LEA)
Number of Hedge Fund Holders: 34
Lear Corporation (NYSE:LEA) is engaged in the design, development, engineering, manufacturing, and supply of automotive seating, electrical distribution systems, and related components for original equipment manufacturers (OEMs) in the automotive industry. Lear Corporation (NYSE:LEA) ranks 9th on our list of the best auto stocks. On February 20, the company declared a quarterly dividend of $0.77 per share, in line with previous. The dividend is payable on March 27, to shareholders on record as of March 8.
According to Insider Monkey’s fourth quarter database, 34 hedge funds were bullish on Lear Corporation (NYSE:LEA), compared to 32 funds in the earlier quarter. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 6.25 million shares worth over $833 million.
Diamond Hill Capital Mid Cap Strategy made the following comment about Lear Corporation (NYSE:LEA) in its Q2 2023 investor letter:
“As markets have risen, we have been cautious about deploying cash. That said, we are still finding attractive values in the market and capitalized on attractive entry points to initiate three new positions in Q2: Ferguson, SBA Communications Corp and Lear Corporation (NYSE:LEA).
Lear is a leading manufacturer of global automotive seating and is end-market agnostic to the ICE/EV (internal combustion engine to electric vehicles) secular shift. Lear has a stable business with attractive cash-generation capabilities. A recent market selloff allowed us to establish a market position at an attractive discount to our estimate of intrinsic value.”
8. Ferrari N.V. (NYSE:RACE)
Number of Hedge Fund Holders: 34
Ferrari N.V. (NYSE:RACE) is a global luxury performance sports car manufacturer that engages in the design, engineering, production, and sale of various car models, including special series, limited edition supercars, and track cars. It is one of the best auto stocks to monitor. On February 1, Ferrari N.V. (NYSE:RACE) reported a Q4 non-GAAP EPS of Є1.62 and a revenue of Є1.52 billion, up 10.9% on a year-over-year basis. Shipments for the fourth quarter of 2023 totaled 3,245 units, reflecting a 2% decrease compared to the same period in 2022.
According to Insider Monkey’s fourth quarter database, 34 hedge funds were bullish on Ferrari N.V. (NYSE:RACE), compared to 31 funds in the earlier quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the biggest stakeholder of the company, with 345,009 shares worth $116.3 million.
Ensemble Capital made the following comment about Ferrari N.V. (NYSE:RACE) in its Q1 2023 investor letter:
“Ferrari N.V. (NYSE:RACE) (+26.48%): The luxury automaker’s long awaited Purosangue, their first four door, four seater vehicle, has proven so popular that the company announced that they have ceased accepting new orders as they are sold out through all of this year and into 2024. The Purosangue is designed not as a copycat sports utility vehicle that many other luxury automakers sell, but as a true Ferrari car that their devoted fan base can use for more practical transportation needs. Since the average Ferrari is only driven a few thousand miles a year or less, they are best understood as mechanical works of art rather than a means of transportation. But with the introduction of the Purosangue, Ferrari enthusiasts will have a vehicle that meets transportation needs, while still delivering the extremely high end experience that you would expect from a car that costs about $500,000.”
7. Autoliv, Inc. (NYSE:ALV)
Number of Hedge Fund Holders: 35
Autoliv, Inc. (NYSE:ALV) specializes in the development, manufacturing, and supply of passive safety systems for the automotive industry globally. It is one of the top auto stocks to invest in. In Q4 2023, Autoliv, Inc. (NYSE:ALV) achieved significantly improved profitability attributed to price increases, organic growth, and cost-cutting measures. The net income per share reached $3.74, more than doubling the figure reported in the previous year. On February 20, Autoliv declared a quarterly dividend of $0.68 per share, in line with previous. The dividend is payable on March 27, to shareholders on record as of March 12.
According to Insider Monkey’s fourth quarter database, 35 hedge funds were bullish on Autoliv, Inc. (NYSE:ALV), compared to 37 funds in the prior quarter. Christer Gardell and Lars Forberg’s Cevian Capital is the largest stakeholder of the company, with 6.3 million shares worth $694 million.
6. CarMax, Inc. (NYSE:KMX)
Number of Hedge Fund Holders: 38
CarMax, Inc. (NYSE:KMX) is a used vehicle retailer in the United States, operating through two segments – CarMax Sales Operations and CarMax Auto Finance. The company sells a variety of used vehicles, including domestic, imported, luxury, hybrid, and electric vehicles. On December 21, 2023, CarMax, Inc. (NYSE:KMX) reported a Q3 GAAP EPS of $0.52, beating market estimates by $0.11. The revenue of $6.1 billion, however, fell short of Street consensus by $200 million.
According to Insider Monkey’s fourth quarter database, 38 hedge funds were bullish on CarMax, Inc. (NYSE:KMX), compared to 35 funds in the last quarter. Ric Dillon’s Diamond Hill Capital is the largest stakeholder of the company, with 6.7 million shares worth over $514 million.
CarMax, Inc. (NYSE:KMX) ranks 6th on our list of the best auto stocks, along with hedge fund favorites like General Motors Company (NYSE:GM), Tesla, Inc. (NASDAQ:TSLA), and Ford Motor Company (NYSE:F).
Madison Mid Cap Fund stated the following regarding CarMax, Inc. (NYSE:KMX) in its fourth quarter 2023 investor letter:
“The bottom five detractors for the quarter were Arch Capital Group, Liberty Broadband, Brown & Brown, Markel Group, and CarMax, Inc. (NYSE:KMX). Finally, shares in CarMax were volatile in the quarter, but ended up lagging the index as investors continue to wait for stabilization in the weak used car market.”
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Disclosure: None. 13 Best Car Stocks To Buy Right Now is originally published on Insider Monkey.
