In this article, we discuss the 5 best auto stocks to invest in. If you want to find out more about the industry, take a look at 10 Best Auto Stocks to Invest In.
5. Stellantis N.V. (NYSE:STLA)
Number of Hedge Fund Holders: 25
Stellantis N.V. (NYSE:STLA) is a Dutch automaker that is also one of the oldest car companies in the world as it was founded in 1899. The company makes and sells cars, commercial vehicles, engines, and transmission systems.
Stellantis N.V. (NYSE:STLA) has some of the strongest market shares among all its peers. The company’s European market share stands at 33%, its Latin America share is 30.7%, and it has a dominant position in the large commercial electric vehicle market by holding half or 50% of the market. It also has a fortress balance sheet via holding EUR60 billion in cash, which leads to a cash per share of $19.08 and net cash per share of $10. This in turn is very close to its current share price, and should the share price grow even marginally, then the potential investor might benefit heavily.
RBC Capital increased Stellantis N.V. (NYSE:STLA)’s share price target to EUR21 from EUR19 in August 2022. Insider Monkey’s Q2 2022 survey of 895 hedge funds revealed that 25 had held a stake in the company.
Out of these, Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is Stellantis N.V. (NYSE:STLA)’s largest investor, owning 36 million shares that are worth $456 million.
4. Ferrari N.V. (NYSE:RACE)
Number of Hedge Fund Holders: 33
Ferrari N.V. (NYSE:RACE) is perhaps one of the most iconic car companies in the world. Its brand of cars is among the most sought in the world and the company sells its products through its own retail stores and dealers. Ferrari N.V. (NYSE:RACE) is headquartered in Maranello, Italy.
For the first half of this year, the company’s free cash flows also grew by 45%, and through a targeted free cash flow growth of 10% for the next five years, the firm’s shares appear to be undervalued.
RBC Capital raised Ferrari N.V. (NYSE:RACE)’s share price target to EUR 261 from EUR 260 in August 2022. During this year’s June quarter, 33 of the 895 hedge funds polled by Insider Monkey had held a stake in the company.
Ferrari N.V. (NYSE:RACE)’s largest investor is Anand Desai’s Darsana Capital Partners which owns 1.2 million shares that are worth $229 million.
Ensemble Capital mentioned the company in its Q1 2022 investor letter. Here is what the fund said:
“Ferrari (7.3% weight in the Fund): As WE DESCRIBED a year ago in this letter, Ferrari’s chief marketing officer’s hardest job is not getting people to buy a Ferrari, but to tell some of them no. The company is in the business of selling rare, luxury products and so by design they greatly limited the number of vehicles they sell. This extreme constraint has led to a wait list of well over a year with a customer base so devoted to the company that even in the midst of the Financial Crisis of 2008-09, the number of vehicles they sold only declined by 4%. Their customers are so price insensitive, that the company often sells out of their limited edition super cars that sell for millions of dollars before they even announce the price. For a Ferrari collector the high prices are a feature, not a bug, as it is the price that makes Ferrari ownership so exclusive.”
3. Ford Motor Company (NYSE:F)
Number of Hedge Fund Holders: 46
Ford Motor Company (NYSE:F) is an iconic American car company that is widely credited with having pioneered the automotive revolution and mass production. The company manufactures and sells a wide variety of vehicles in the U.S., and it is headquartered in Dearborn, Michigan.
Ford Motor Company (NYSE:F) is heavily investing in the electric vehicle space, as the company plans to have a production capacity of 600,000 vehicles by the end of 2023 and grow it to a whopping three million by 2026. This is a key point as the recently passed Inflation Reduction Act in the U.S. Senate promises major incentives to consumers to buy electric vehicles. The company’s free cash flows also grew by a remarkable 164% annually by the end of its second fiscal quarter of 2022.
Deutsche Bank increased Ford Motor Company (NYSE:F)’s share price target to $13 from $12 in July 2022, citing the company’s strong fiscal performance and pricing model. Insider Monkey scanned 895 hedge fund portfolios for this year’s first quarter to discover that 46 had bought the company’s shares.
D. E. Shaw’s D E Shaw is Ford Motor Company (NYSE:F)’s largest investor. It has a $257 million stake that comes via 23 million shares.
Baron Funds mentioned the company in its Q1 2022 investor letter, outlining that:
“Ford (NYSE:F) is another example of typical industrial manufacturing business executive mindsets. The April 18, 2022, Bloomberg Businessweek cover story features Ford CEO Jim Farley behind the wheel of an electrified Ford F-150 Lightning. The article is titled, “Hey Elon, THIS is a truck.” I thought the article was terrific. One idea especially stood out to me. Since the F-150 is such a popular vehicle, it “argued for a gradual approach to electrification. Essentially the company retrofitted an existing F-150 with an electric powertrain rather than develop an entirely new truck.” No all-in financial and operation bet by this company on electrification.”
2. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 72
Tesla, Inc. (NASDAQ:TSLA) is the world’s most famous manufacturer of electric vehicles. The company has secured a dominant position in the market after struggling through extreme manufacturing challenges with a car type that was previously thought of as science fiction.
Tesla, Inc. (NASDAQ:TSLA)’s strongest point right now is decreasing costs. These are necessary for the company to increase its market penetration in a market that is supply constrained. On this front, Tesla, Inc. (NASDAQ:TSLA)’s latest quarterly results saw the company reduce its production costs by 10% and start on a track of further reductions. Additionally, the quarter also saw Tesla, Inc. (NASDAQ:TSLA)’s energy business bring in solid revenue.
Citi raised Tesla, Inc. (NASDAQ:TSLA)’s share price target to $424 from $375 in August 2022, highlighting that strong execution and non automotive upside drove the decision. 72 out of the 895 hedge funds part of Insider Monkey’s Q2 2022 survey had bought the company’s shares.
Tesla, Inc. (NASDAQ:TSLA)’s largest investor in our database is Catherine D. Wood’s ARK Investment Management. It has a $1 billion stake via 1.4 million shares.
Baron Funds mentioned the company in its Q2 2022 investor letter. Here is what the fund said:
When we completed our initial due diligence on Tesla, which diligence has been ongoing since 2014, we decided to invest $360 million in Tesla over the next two years. I then called Roger and outlined why I thought we could earn 20 times our capital over the next 10 years. Roger was so certain I was wrong that he offered to bet me $1 million that Tesla would fail. “Roger, I can’t bet you a million dollars. First, if you are right, I couldn’t afford to pay you. Second, if I’m right, you’re my friend, and I couldn’t take your money.” We settled on a dinner bet…” (Click here to see the full text)
1. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 75
General Motors Company (NYSE:GM) is one of the oldest American car companies which was set up in 1908. The firm makes and sells trucks, cars, crossovers, and other auto parts all over the world including North America, Asia, and Africa.
As counterintuitive as it sounds, General Motors Company (NYSE:GM) might be one company that has benefitted from fears of a recession that have plagued investors’ minds throughout the course of this year. Its automotive enterprise value estimated at $48 billion is in the ballpark of its market capitalization, courtesy of the large share price drops due to recessionary fears that were not reflected on the company’s balance sheet. The company is also a first mover in the robotaxi market which is estimated to grow at a CAGR of 137% by 2030. General Motors Company (NYSE:GM) also pays a 9 cent dividend for a 0.92% yield.
75 of the 895 hedge funds polled by Insider Monkey for this year’s second quarter had invested in General Motors Company (NYSE:GM).
General Motors Company (NYSE:GM)’s largest investor is Warren Buffett’s Berkshire Hathaway which owns 52 million shares that are worth $1.6 billion.
Diamond Hill Capital mentioned the company in its Q1 2022 investor letter. Here is what the fund said:
“General Motors—and the auto industry in general—continues to face headwinds related to supply chain disruptions and raw material cost inflation. In addition, uncertainty surrounding global energy markets due to inflation and the conflict in Ukraine has created a greater economic burden on consumers, which tends to slow automotive sales.”
Disclosure: None. You can also take a look at Top Ten Semiconductor ETFs to Buy in 2022 and 10 Cybersecurity Stocks to Buy as US-China Tensions Mount.
