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There’s a Silver Lining in Struggling Auto Stocks

Buying now will benefit shareholders down the road.

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With U.S. auto sales gradually improving off of multidecade lows and Japan's recovery in flux following the March 11 earthquake, we think it is a good time to update our auto sales discussion published in a strategist last June. We continue to remain very optimistic about the U.S. auto industry, which we believe is still at a seasonally adjusted annualized selling rate (SAAR) that is far too low. Although the sector always will be very volatile and full of uncertainty, we think long-term volume is still trending upward and see great value today in automaker stocks. Below we discuss light-vehicle sales and where we think they are going, and then take a look at some of our favorite automaker ideas.

U.S. light-vehicle sales data since 1951 helps put the recent sales crash in perspective. There were only 10.43 million vehicles sold in 2009, quite a decline from the decade's high of 17.35 million in 2000. The last time sales were close to 10.43 million was 1982, with 10.36 million, as the chart below shows (shaded bars denote recession years).

David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.