General Motors Company (GM), Ford Motor Company (F), Sirius XM Radio Inc (SIRI): Earning Maximum Gains in the Auto Industry

Currently, Sirius XM Radio Inc (NASDAQ:SIRI) is trading higher by 4% after announcing earnings. In the quarter, Sirius added 452,890 subscribers, posted record revenue of $897 million, and increased its free cash-flow guidance for 2013 to almost $1 billion. The reason for this strength is due to the fact that auto sales are growing rapidly. Therefore, with Sirius seeing such strong fundamental performance with auto sales, and with auto sales expected to continue to grow fast over the next two years, I say “buy” Sirius!

Conclusion (Investment Outlook)

When you look at Sirius XM Radio Inc (NASDAQ:SIRI) from a valuation point-of-view, you realize that both General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F) are clearly cheaper. Therefore, it makes sense to invest in Ford Motor Company (NYSE:F) or General Motors Company (NYSE:GM), because after all these are the two companies responsible for the growth, right?

In my book, Taking Charge With Value Investing (McGraw-Hill, 2013), I discuss in detail when a stock is clearly hated by the market but is obviously the better value. My suggestion, and what has worked for me, is to capitalize on both in the growing space. In other words, why put all your eggs in one basket?

You already know that Sirius trades with a price/sales near 6.0 and a forward P/E ratio of 25.0, making it clearly more expensive. Yet it performs with the growth of auto sales, and with auto sales expected to rise, it makes no sense not to buy a stock that has performed so well with growth. Therefore, a small position in both Sirius and either General Motors Company (NYSE:GM) or Ford Motor Company (NYSE:F) might prove wise, as you take advantage of Sirius’ consistent return and anticipate that sooner or later Ford and GM will reflect fundamental performance in stock valuation.

The article Earning Maximum Gains in the Auto Industry originally appeared on Fool.com and is written by Brian Nichols.

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