In this article, we will take a look at the 5 most undervalued auto stocks to buy according to hedge funds. To read our analysis of the recent market trends and activity, you can go to the 12 Most Undervalued Auto Stocks to Buy According to Hedge Funds.
5. AutoNation, Inc. (NYSE:AN)
Latest P/E Ratio: 5.79
Number of Hedge Fund Holders: 38
AutoNation, Inc. (NYSE:AN) is one of the largest automotive retailers in the United States. As of December 31, 2022, it owned and operated 343 new vehicle franchises from 247 stores located in the United States, predominantly in major metropolitan markets in the Sunbelt region.
On October 27, AutoNation, Inc. (NYSE:AN) released its financial results for Q3 2023. It generated revenues of $6.9 and net income of $244 million. The normalized EPS was recorded at $0.67 for the quarter, which exceeded consensus estimates by $0.16.
According to the Insider Monkey data on 910 leading hedge funds, 38 hedge funds were long AutoNation, Inc. (NYSE:AN) shares as of Q3 2023, with the total shares held by hedge funds valued at $532 million. Anand Parekh’s Alyeska Investment Group was the largest hedge fund shareholder with ownership of 0.6 million shares valued at $97 million.
4. Lithia Motors, Inc. (NYSE:LAD)
Latest P/E Ratio: 7.19
Number of Hedge Fund Holders: 38
Based in Medford, Oregon, Lithia Motors, Inc. (NYSE:LAD) is one of the largest global automotive retailers providing a wide array of products and services throughout the vehicle ownership lifecycle. Founded in 1946, it currently owns more than 300 stores supporting over 50 automotive brands.
On October 2, Lithia Motors, Inc. (NYSE:LAD) announced a revised agreement on improved terms to enter into a strategic partnership with Pinewood Technologies and to acquire Pendragon’s UK motor division and vehicle management division. The total cash consideration for the acquisition of Pendragon’s businesses and a 16.7% stake in Pinewood Technologies amounts to £397 million.
As part of the transaction, the remaining business of Pendragon, comprising of the Pinewood DMS platform, will remain listed on the London Stock Exchange under Pinewood Technologies plc. The strategic partnership includes acquisition of 16.7% stake, and the adoption of Pinewood Technologies platform across the UK operations of Lithia Motors, Inc. (NYSE:LAD).
Like other stocks such as Ford Motor Company (NYSE:F), Aptiv PLC (NYSE:APTV), and LKQ Corporation (NASDAQ:LKQ), the shares of Lithia Motors, Inc. (NYSE:LAD) are among the most undervalued auto stocks to buy according to hedge funds.
3. Aptiv PLC (NYSE:APTV)
Latest P/E Ratio: 10.4
Number of Hedge Fund Holders: 38
Dublin, Ireland-based Aptiv PLC (NYSE:APTV) is a leading global technology and mobility architecture company. It designs and manufactures vehicle components and provides electrical, electronic, and active safety technology solutions to the global automotive and commercial vehicle markets, creating the software and hardware foundation for vehicle features and functionality.
On November 2, Aptiv PLC (NYSE:APTV) released its financial results for Q3 2023. Its revenues increased by 11% y-o-y to $5.1 billion, while it reported a net income of $1.6 billion. It generated a normalized EPS of $1.30, which exceeded consensus estimates by $0.07.
Following the earnings release, Barclays analyst Dan Levy lowered the price target for Aptiv PLC (NYSE:APTV) shares to $112 from $138 and maintained an ‘Overweight’ rating. The target price represents a potential upside of 34.76% based on the share price on November 24.
As of Q3 2023, 33 of the 910 hedge funds tracked by Insider Monkey were long Aptiv PLC (NYSE:APTV) and held shares worth $748 million. Ian Simm’s Impax Asset Management was the largest shareholder with ownership of 6.8 million shares valued at $669 million.
2. Ford Motor Company (NYSE:F)
Latest P/E Ratio: 6.82
Number of Hedge Fund Holders: 43
Dearborn, Michigan-based Ford Motor Company (NYSE:F) is a global automobile manufacturing company that offers trucks, sport utility vehicles commercial vans and cars and Lincoln luxury vehicles, as well as connected services. The company was founded in 1903 and has since grown significantly. It currently employs more than 186,000 personnel worldwide.
On November 2, Ford Motor Company (NYSE:F) released its sales figures for the month of October. The company managed to sell nearly 0.15 million vehicles during the month, including 6,831 electric vehicles. Even though electric vehicles and hybrid vehicles sales increased on a year-over-year basis, the decline in internal combustion vehicles sales led to an overall year-over-year decline of 5%.
As of Q3 2023, 43 of the elite hedge funds tracked by Insider Monkey held Ford Motor Company (NYSE:F) shares, valued at $1.3 billion. Ken Fisher’s Fisher Asset Management was its largest hedge fund shareholder with ownership of 55.6 million shares valued at $691 million.
1. General Motors Company (NYSE:GM)
Latest P/E Ratio: 3.95
Number of Hedge Fund Holders: 66
General Motors Company (NYSE:GM) is a leading multinational automotive company focused on manufacturing and sale of trucks, crossovers, cars and automobile parts and accessories across the globe. Major brands such as Buick, Cadillac, Chevrolet, GMC, Holden, Baojun, and Wuling fall under its wings.
General Motors Company (NYSE:GM) posted a strong quarterly performance in Q3 2023. Its revenue increased by 5% y-o-y to $44.1 billion while net income decreased by 7% y-o-y to $3.1 billion. It managed to beat consensus estimates for EPS by $0.37 with quarterly figures of $2.20.
Following the earnings release, RBC Capital analyst Tom Narayan raised the price target for General Motors Company (NYSE:GM) shares to $48 from $47 and maintained an ‘Outperform’ rating. The target price represents a potential upside of 69.79%, based on the share price on November 23.
General Motors Company (NYSE:GM) ranks first on our list of most undervalued auto stocks according to hedge funds. The shares of the company were owned by 66 hedge funds with a total value of $2.0 billion according to the Insider Monkey database. Harris Associates was the largest hedge fund shareholder with ownership of 35.5 million shares valued at $1.2 billion.
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