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After the worst plunge last year since the 1970s, the U.S. auto industry bounced back strongly in the first quarter of 2021. This is especially true as car sales soared 11% in the first quarter of 2021 buoyed by the waning signs of COVID-19 crisis and concerns over potential vehicle shortages.
The rapid vaccinations, unprecedented stimulus and reopening of the economies boosted demand for everyday travel, resulting in spike in auto sales. According to figures compiled by Edmunds.com, automakers sold more than 3.9 million vehicles during the first quarter with several major companies reporting March sales that nearly doubled the levels recorded in the same month a year earlier (read: Best Performing ETFs of Q1 2021).
Of the six major American and Japanese automakers, Toyota Motor (TM - Free Report) was the biggest winner, registering a 21.6% surge in sales. This was followed by 16.2% increases for Honda Motors (HMC - Free Report) , 10.8% for Nissan (NSANY - Free Report) , 4% for General Motors (GM - Free Report) and 1% for Ford Motor (F - Free Report) . Stellantis (STLA - Free Report) — formed after the merger of Fiat Chrysler and PSA Group — also witnessed a 5% rise in car sales for the first quarter.
The solid trend is likely to continue this year given the robust demand backed by rising consumer confidence and spending. The Fed pledged to keep rates at lower levels until the end of 2023. Consistent lower interest rates will encourage new-car buying, pushing more consumers to avail loans. Further, with continued acceleration in digitalization, the auto industry will get a boost as automakers are propelling their online services.
However, global chip shortage could derail the car production in the coming months that might slow down the recovery in the industry, which just started to see an uptick in sales (read: Auto ETF Under Pressure on Renesas Chip-Plant Fire).
Below we highlight the pure play auto ETF and a few stocks that could be attractive picks for 2021:
This fund offers a pure-play global exposure to 34 auto stocks by tracking the NASDAQ OMX Global Auto Index. It has a moderate concentration across components as each of these make up for less than 8.4% share. CARZ has $72.4 million in AUM and trades in a small average daily trading volume of about 23,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with High risk outlook.
Tesla is the market leader in battery-powered electric car sales in the United States owning around 60% of market share. The stock has seen a solid earnings estimate revision of 5 cents over the past month for this year with estimated growth of 87%. Tesla has a Zacks Rank #3 and a Growth Score of A (read: Tesla ETFs to Tap Robust Q1 Deliveries, Biden EV's Plan).
The Goodyear Tire & Rubber Company (GT - Free Report)
It is one of the largest tire manufacturing companies in the world, selling under Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands (such as, Lee, Kingstone, Douglas, Mohave and Republic) as well as private-label brands (namely, Roadhandler, Star and Monarch). The stock has witnessed a positive earnings estimate revision of 3 vents for this year over the past 30 days and has an estimated growth rate of 146.6%. It has a Zacks Rank of 3 and a Growth Score of A.
This company is a leading supplier of Dealer Exclusive replacement parts to the Automotive, Medium and Heavy Duty Aftermarkets. The stock has witnessed a positive earnings estimate revision of 10 cents for this year over the past 30 days and has an estimated earnings growth rate of 30.1%. It has a Zacks Rank #2 (Buy) and a Growth Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Cooper Tire & Rubber Company
This company manufactures, markets and sells tires of a wide range of vehicles including truck and bus radials (TBR), and motorcycles. The stock has witnessed a solid earnings estimate revision of 30 cents for this year in a month and has an estimated earnings growth rate of 37.8%. It has a Zacks Rank #2 and a Growth Score of B.
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Auto Sales Jump in Q1: ETF & Stocks to Ride On
After the worst plunge last year since the 1970s, the U.S. auto industry bounced back strongly in the first quarter of 2021. This is especially true as car sales soared 11% in the first quarter of 2021 buoyed by the waning signs of COVID-19 crisis and concerns over potential vehicle shortages.
The rapid vaccinations, unprecedented stimulus and reopening of the economies boosted demand for everyday travel, resulting in spike in auto sales. According to figures compiled by Edmunds.com, automakers sold more than 3.9 million vehicles during the first quarter with several major companies reporting March sales that nearly doubled the levels recorded in the same month a year earlier (read: Best Performing ETFs of Q1 2021).
Of the six major American and Japanese automakers, Toyota Motor (TM - Free Report) was the biggest winner, registering a 21.6% surge in sales. This was followed by 16.2% increases for Honda Motors (HMC - Free Report) , 10.8% for Nissan (NSANY - Free Report) , 4% for General Motors (GM - Free Report) and 1% for Ford Motor (F - Free Report) . Stellantis (STLA - Free Report) — formed after the merger of Fiat Chrysler and PSA Group — also witnessed a 5% rise in car sales for the first quarter.
The solid trend is likely to continue this year given the robust demand backed by rising consumer confidence and spending. The Fed pledged to keep rates at lower levels until the end of 2023. Consistent lower interest rates will encourage new-car buying, pushing more consumers to avail loans. Further, with continued acceleration in digitalization, the auto industry will get a boost as automakers are propelling their online services.
However, global chip shortage could derail the car production in the coming months that might slow down the recovery in the industry, which just started to see an uptick in sales (read: Auto ETF Under Pressure on Renesas Chip-Plant Fire).
Below we highlight the pure play auto ETF and a few stocks that could be attractive picks for 2021:
First Trust NASDAQ Global Auto ETF (CARZ - Free Report)
This fund offers a pure-play global exposure to 34 auto stocks by tracking the NASDAQ OMX Global Auto Index. It has a moderate concentration across components as each of these make up for less than 8.4% share. CARZ has $72.4 million in AUM and trades in a small average daily trading volume of about 23,000 shares. The product charges 70 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with High risk outlook.
Tesla Inc. (TSLA - Free Report)
Tesla is the market leader in battery-powered electric car sales in the United States owning around 60% of market share. The stock has seen a solid earnings estimate revision of 5 cents over the past month for this year with estimated growth of 87%. Tesla has a Zacks Rank #3 and a Growth Score of A (read: Tesla ETFs to Tap Robust Q1 Deliveries, Biden EV's Plan).
The Goodyear Tire & Rubber Company (GT - Free Report)
It is one of the largest tire manufacturing companies in the world, selling under Goodyear, Kelly, Dunlop, Fulda, Debica, Sava and various other “house” brands (such as, Lee, Kingstone, Douglas, Mohave and Republic) as well as private-label brands (namely, Roadhandler, Star and Monarch). The stock has witnessed a positive earnings estimate revision of 3 vents for this year over the past 30 days and has an estimated growth rate of 146.6%. It has a Zacks Rank of 3 and a Growth Score of A.
Dorman Products Inc. (DORM - Free Report)
This company is a leading supplier of Dealer Exclusive replacement parts to the Automotive, Medium and Heavy Duty Aftermarkets. The stock has witnessed a positive earnings estimate revision of 10 cents for this year over the past 30 days and has an estimated earnings growth rate of 30.1%. It has a Zacks Rank #2 (Buy) and a Growth Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Cooper Tire & Rubber Company
This company manufactures, markets and sells tires of a wide range of vehicles including truck and bus radials (TBR), and motorcycles. The stock has witnessed a solid earnings estimate revision of 30 cents for this year in a month and has an estimated earnings growth rate of 37.8%. It has a Zacks Rank #2 and a Growth Score of B.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>