February auto sales disappoint but no reason for panic
You can come up with lots of reasons why investors shouldn’t panic at the slide in February U.S. auto sales to a seasonally adjusted annual rate of 10.4 million. That was down from the seasonally adjusted 10.8 million sales rate in January 2010 although up from the 9.2 million rate of February 2009.
Snow storms. Troubles and more troubles at Toyota. A big drop in sales from brands such as Saturn, Pontiac, Hummer, and Saab that General Motors (GM) has decided to discontinue.
All those cut in February sales and make hard to argue that the recovery in the auto industry has stalled.
But the numbers aren’t a rousing endorsement of pedal to the metal growth either.
For after the correction, think industrial stocks: Market history says this is their time
Are you in the right sectors of the stock market for this point in the economic recovery? (Yes, despite the stock market correction, we are still in an economic recovery.)
Solid data stretching back to 1945 argues that certain industries and sectors outperform during specific stages of any economic recovery. (The best work on this subject comes from Sam Stovall, the chief investment strategist for Standard & Poor’s Equity Research Services. His 1996 book Sector Investing is still the best resource on the subject to my mind.)
My first rule of investing is “Put every trend you can on your side.” Neglecting what we know about what sectors thrive when is in my opinion wasting an asset that could help you make bigger profits.
Stovall divides the economic cycle into four stages.
Update Johnson Controls (JCI)
Sure, Johnson Controls (JCI) beat Wall Street estimates by a huge 14 cents a share when it announced first quarter fiscal 2010 earnings before the stock market opened on January 22.
But the big news, the news that had the stock up 4.5% for the day as of 2:30 in New York, was the company’s blow out guidance for all of 2010. Johnson Controls now sees 2010 revenue of $33 billion. That’s up from the company’s earlier projection of $31 billion and well above the Wall Street analyst consensus of $31.7 billion. Earnings for fiscal 2010 will be in the range of $1.70 to $1.75 a share. The company had projected earnings of $1.35 to $1.45 a share. The Wall Street consensus was $1.53.
Ford’s dilemma: It has to sell more cars in places like India to survive but can it make a profit there?
Good luck with that, Ford.
Ford Motor (F) CEO Alan Mulally has signaled that the company will go hard after customers in the world’s developing economies with its new platforms for small and mid-sized cars. A new car built on the re-launched Fiesta platform and branded as the Figo will be produced in India and sell for under $8,000, for example.
Ford doesn’t have much of a presence in India. The company sold just 40,000 cars there in 2009. The expanded Chennai, India plant that will make the Figo will have the capacity to make 200,000 cars annually.
Selling cars globally rather than concentrating on the North American market is essential for any long-lasting revival for Ford and General Motors (GM).
But it’s not clear how much money any auto company is going to make in the car business in the years ahead.
The U.S. is now only the second biggest auto market in the world
China is now the biggest auto market in the world.
In 2009 sales of passenger cars, buses, and trucks grew by 49% to a total of 13.6 million units. With U.S. sales falling 21% in 2009 to 10.4 million that pushed the United States to No. 2.
Three things you should know about the Chinese auto market as you start looking for a play on the growth in this market.
