Can These Stocks Bounce Back?
However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.
There are 57 stocks listed under "automotive" in the CAPS screener, but only some of them carry well-respected four- and five-star ratings. Those accolades mean our 180,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what our members are saying about the ones that follow.
CAPS Rating Today (out of 5)
52-Week Price Change
Estimated 5-Year Growth Rate
|Johnson Controls (NYS: JCI)|
|PACCAR (NAS: PCAR)|
|Tata Motors (NYS: TTM)|
Source: Motley Fool CAPS.
International and financial worries are again gripping the market, so while the S&P 500 is up 2% over the past 12 months, it might not be surprising to learn that CAPS automotive stocks have done worse, falling more than 10% in that same time span. So let's take a closer look at why investors think a select few of these companies won't be jumping from the frying pan into the fire now that the markets are roiled again.
Keep on' motorin'
With General Motors (NYS: GM) experiencing a 20% jump in auto sales in September and Ford (NYS: F) pacing a 9% gain, there might be something to Johnson Controls' expecting the North American auto market to help boost profits next year by 20%.
The auto-parts maker reported 2012 guidance that was somewhat below expectations, but analysts were heartened nonetheless that the company would still be growing at a fairly brisk pace. Consolidated sales are expected to rise 9%, with the automotive segment growing 6%. The real growth, however, is expected to come from China, where Johnson has a 44% share of the seating market. Growth there is expected to jump 21%.
Tata Motors saw a 22% jump in its sales as well in September, but some 92% of its sales come from its home country of India. In contrast, 72% of GM's sales over the past six months came from outside the U.S., while 42% of Ford's business is outside North America.
CAPS member Astros13 says a continuously improving auto industry will allow Johnson Controls to drive toward higher growth.
Diversified play on automotive sector. As things get better this high beta stock should outperform the market. While there is single company risk with JCI I [believe] it is lower than simply buying one of the automotives because of how diversified JCI is as a supplier. This a play on [the] market turning and recovering.
China gets a lot of attention for the potential of its auto market, but don't discount India. Analysts expect the market there to grow 10% to 12% for the fiscal year that ends next March. Tata, as the dominant player on the subcontinent, will determine a lot of how the industry plays out.
ShawnRobinson believes that despite disappointing Nano sales -- the Nano is the world's cheapest car -- it has what it takes to move forward.
This was a tough one for me as I [don't] entirely know their business. Not to mention the [Nano] never took off. But, the engineering on the Nano was very impressive. And if the company has those kind of engineers working for them, they are bound to hit it right.
We got us a convoy!
While analysts were pointing to September auto sales as a sign that the economy might recover, the trucking industry was giving off conflicting signs as the volume of U.S. truckers purchasing fuel dropped at a faster rate during the past quarter than in any other non-recessionary quarter over the past decade. That, say trucking industry analysts, is a sign a new recession is revving up.
While that would seem to be underscored by falling profits at trucking giant Navistar (NYS: NAV) , which saw a year-ago profit for its truck segment turn into a loss in its most recent quarter, much of Navistar's woes had to do with restructuring charges and lower revenue from military contracts. PACCAR, which makes the Kenworth and Peterbilt line of trucks, is actually expected to see higher demand for its medium- and heavy-duty trucks. And engine maker Cummins (NYS: CMI) , which counts both PACCAR and Navistar as customers, forecasts 14% annual growth through 2015.
So it seems as though there's enough circumstantial evidence that the economy won't drive off the road in another recession. Maybe it will just hit the shoulder.
With 93% of the 678 CAPS members rating PACCAR to put the pedal to the metal, there's a convoy of positive thinking about its future. But you can tell us on the PACCAR CAPS page if you agree, and add the trucker to your Watchlist to see whether it rules the road.
The ball's in your court
There are many factors that go into whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today, and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.
At the time this article was published Fool contributorRich Dupreyholds no position in any company mentioned. Check out hisholdings and a short bio. The Motley Fool owns shares of Ford.Motley Fool newsletter serviceshave recommended buying shares of General Motors, Ford, Cummins, and PACCAR. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.