TSLA: 3 Auto Stocks "Ready to Roll" as We Emerge From Quarantine

Interest rates are at an all-time low, meaning consumers are tempted to borrow money to purchase or lease new vehicles, homes and other big-ticket items. Though unemployment is rising and consumers lack confidence, the auto industry is set to get a boost simply because quarantines are ending throughout the land.

The vast majority of Americans need an automobile to get to work, visit family, socialize and ultimately get the most out of life. Furthermore, urban dwellers will be less inclined to take mass transit as they are fearful of contracting CoVid-19 – meaning these city slickers will seriously consider buying or leasing an automobile. Add in the fact that the federal government might launch another cash-for-clunkers program and investors have all the more reason to load up on these three auto stocks: Tesla, Honda and General Motors.

Tesla (TSLA)

If you were capable of traveling through time a decade or two into the future, you would likely find the majority of gas-powered vehicles being phased out in favor of battery-powered vehicles. The death of the fossil fuel industry is arriving quicker than expected. TSLA stands to benefit from this trend, as evidenced by its sky-high stock price. Though TSLA has a trailing 12-month P/E ratio of nearly 200, the days of trading stocks based on P/E ratios are quickly fading away. As savvy investors know, perception ultimately drives the market.

Put TSLA’s egregiously high P/E ratio aside for a moment. TSLA vehicles on the roads could outnumber those made by other automakers within a couple decades or less. Consider the fact that the stock has a solid B POWR Rating with an A Trade Grade and an A Peer Grade. Furthermore, the POWR Ratings have TSLA ranked number one in the Auto & Vehicle manufacturers industry.

The fact that TSLA is likely to move its headquarters to tax-friendly Texas just might give it the momentum necessary to re-test its 52-week high of $968.99. The stock will likely move back toward its mid-February price of $917 in the near future as vehicle production restarts.

Do not fall into the trap of assuming TSLA founder Elon Musk is serious when stating TSLA stock is overpriced. Musk is a master-level troll willing to tweet just about anything to get attention. In the case of TSLA, it pays to be a contrarian. The stock was priced around $300 when Musk famously smoked marijuana on Joe Rogan’s podcast and, contrary to investor expectations, climbed to $360 within three months. The same is likely to occur now that Musk is bad-mouthing TSLA stock.

Scoop up TSLA today and watch it climb as vehicle production resumes in California – and possibly in tax-friendly Texas or Nevada within a couple years or less.

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Honda Motor Co. (HMC)

Wouldn’t it be nice to get 200,000 miles out of your vehicle, making it the last gas-powered automobile you own until the transition to battery-powered automobiles at some point in the next decade? Honda vehicles do just that. Ask anyone who has owned a Honda about the ownership experience and you will be inundated with positivity.

However, HMC’s 1-year, 5-year and 10-year charts have a clear downward trend. Though HMC vehicles are slightly declining in popularity, HMC is still ranked 6 of 25 stocks in the POWR Ratings’ auto and vehicle manufacturer rankings. HMC POWR Ratings are highlighted by its B Peer Grade and Industry Rank.

A couple more factors are working in favor of HMC, namely the fact that it is the world’s leading maker of motorcycles. Reproduction rates in developed countries are rapidly declining, meaning more people are open to the idea of buying a motorcycle rather than a minivan or sport utility vehicle. Furthermore, if governments around the world mandate new vehicles be powered by battery within 10-20 years, there might be an exception for motorcycles as they require minimal gasoline and emit comparably less carbon dioxide.

American Honda sales are down more than 50% compared to this time last year yet there are signs of improvement. Buy the HMC dip, hold this stock for years and it should perform quite well.

General Motors Company (GM)

Nationalism and isolationism are en vogue, largely due to the rise of “strong man” leaders in nation-states across the globe. Though globalization is not completely ending, it is on a partial pause of sorts as the United States and other countries determine how to proceed after the white swan coronavirus pandemic.

There is a growing push to buy American (or at least North American), bring the jobs back home and boost our own depressed economy rather than line the pockets of foreign workers and corporations. GM stands to benefit from this phenomenon.

GM stock has slowly climbed upward after dropping to $16 in mid-March. This leading U.S. automaker recently beat earnings yet its bottom line is down more than 50% from the year prior. GM’s sales in China are up double-digits in recent months. The stock stands a good chance of reaching TipRanks’ average analyst price target of $30.60 by year’s end.

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TSLA shares rose $18.54 (+2.29%) in premarket trading Tuesday. Year-to-date, TSLA has gained 98.35%, versus a -8.23% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...