Ford Motor (F)

Auto OEMs is a very highly cyclical business. Some are saying that North American auto production is near peak levels. Not expensive, trading at single digit multiples. However, when things turn down, earnings can come down quite a bit. Usually you try to buy these early on in their cycles.

(Market Call Minute.) Strong OEM story. A lot of it has been played out. Feels we are now in a toppy auto cycle. He would be a little cautious.

It is making some lows so it is less than an ideal chart. There are modest revisions. However, you get great encouragement out of China. This is a tough time to invest in this sector. The odds are against you right now. You should sit on the money. Don’t buy now. He prefers Lear.

Has done well from a volume standpoint, but has had a tough time along with the other automakers with other issues and in other parts of the world. The US domestic market is pushing into record territory in terms of units. There is opportunity in Europe and the emerging markets as well. They really haven’t done too much, so it sort of 2 steps forward and 3 steps back. A better play would be to look at suppliers such as Tenneco (TEN-N), Dana (DAN-N), and American Axle (AXL-N).

Did some pretty good earnings, but unfortunately mostly on their domestic US business. They have yet to return to any type of profitability in Western Europe, and are really struggling in the emerging markets. He would be more inclined towards General Motors (GM-N), which in all of their metrics at every single level is looking better.

We are back to 16.5-17 million North American light vehicle sales. This stock has been pretty much in a sideways trend despite its excellent run in sales. He would prefer auto part manufacturers such as Linamar (LNR-T) or Magna (MG-T). They give you a bigger share in the models, plus you are getting into more auto manufacturing companies, giving you more growth.

The story coming into the present was all about cash flow. Globally they have had some great exposure. Right now, this is not the best way to play the auto space. LEA-N focuses in on the electronics systems and seating systems of the cars. He sees as 12% return in that one. There is some technical resistance in F-N.

The VW issue could benefit other car companies temporarily. These companies do tend to recover from these types of things. He is cautious of the auto sector. He does not think it can get much better. Internationally he thinks car sales will be somewhat challenged.

The VW issue could benefit the other autos. Others in the market have been hurt, but there is no evidence it is an industry issue. He likes F-N and has not done that well. It represents good value. It is an international story and Europe is not a constructive place for them. F-N should have its day, but not now.

This is one of the many companies that he looked at closely and didn’t buy. Car company sales right now are absolutely blooming. The average car in the US is 14 years old, so there is a lot of pent-up demand. However, when he sees they have been selling a tremendous amount of cars, it means there are fewer sales in the future.

US auto sales are at all time highs. So how much higher can they go? She prefers auto parts suppliers.

A cyclical stock, which tends to run between October and May. Automobile makers have a tremendous period of seasonal strength from February to May. This company had a bit of a run up this year and topped out around April. Longer-term, beyond the seasonal, there is a flattening of the 200 day moving average with resistance at around $17. Chart is showing a head and shoulders pattern running from 2013. If there is a break down below its current price, you can expect tremendous pain for the stock ahead. Not looking good longer-term.

Looks like this has a little bit of a lid ahead of it. The only thing he doesn’t like on the chart is the high in mid-2014, and then the recent high was lower. Also, there was a low early 2014 and a lower low in the latter part of 2014. This is the making of a lacklustre to declining stock. The overall trend is beginning to look down.

Generally doesn’t buy the OEMs in the auto industry. If you look at autos in general, the OEMs tend to have big, big sales, but very low margins. If you can catch the cycle and the company right, you can make a lot of money. This company has already had a big part of that recovery and has been in a $10-$20 range for the last 10 years now. It seems they are going through a bit of a good of cycle here, so out of the big automakers this would probably be his favourite. He prefers auto parts manufacturers. (See Top Picks.)

A lot of auto manufacturers have had some recall issues, and hopefully that is behind us. That is what has probably cut the automakers shares off a bit. Likes the auto sector in terms of the manufacturers. This is a good value name and he likes it. (See Top Picks.)