3 auto stocks driving higher despite 'Bernanke brake'
Markets may have stalled out thanks to the Federal Reserve's 'tapering' talk, but these names have plenty more gas in the tank.
By Jim Woods, Traders Reserve
Ben Bernanke and his pit crew at the central bank have told Wall Street that at some point later this year, they're going to put the brakes on quantitative easing. The term they've decided to throw into the trading lexicon is "tapering," and the chatter around this shift in policy has caused the market engine to throw a rod.
Stocks, bonds, gold and just about every other asset class have gone off track since the May 22 taper talk was introduced, and, of course, the selling continued after the June 19 FOMC meeting and subsequent Bernanke press conference.
Markets are slowing, but that doesn't mean you can't find stocks to drive your portfolio higher. In fact, several names in the auto sector are doing just that. Here are three auto stocks that are thriving despite the "Bernanke brake."
I don’t think I’ve ever been a bigger fan of a CEO than I am of Tesla Motors' (TSLA) genius founder Elon Musk. The man is one of those entrepreneurs that move the world forward with his brilliant foresight, expert business acumen and force of will.
A few years ago I had the privilege of interviewing Musk, and he's one of those people whose mind just operates on a different, higher level than most. The instantiation of all of Musk's genius attributes can be found in his Tesla vehicles, which are incredible marvels of technology, as well as just a downright pleasure to drive.
For investors, the proof of Musk's expert stewardship can be seen in TSLA shares. The stock is up nearly 185% so far in 2013, and that buying frenzy has been fueled by a string of consecutive positives -- such as a huge earnings beat, rave reviews from Consumer Reports and big technology advances.
The best part of Tesla is that, despite that huge run higher, I think the stock has even more charge left in its bullish battery.
When Americans need to buy a car and want a reliable used vehicle, they go to CarMax (KMX). The company is the No. 1 used car retailer in the U.S., and it's captured the top spot on the podium by offering quality vehicles at attractive prices.
This combination of positives has kept CarMax's fiscal engine revving, and recently the company clocked its third straight quarter of double-digit sales and earnings growth. The gains were fueled not only by strong vehicle sales, but also by revenues from the company's auto financing branch.
Now, even though the Fed's threat to put on the monetary brakes has causes bond yields and mortgage interest rates to spike (the two are tied together), it isn't likely that rates on auto and other consumer loans will rise substantially. These rates are tied to the federal funds rate, and that metric is expected to remain near zero until at least 2015. Persistently low auto loan rates, along with an aging vehicle fleet (the average age of a car in the U.S. is 11 years), could keep the throttle pinned on KMX shares' 72% gain over the past 12 months.
The final auto stock in our garage is industry stalwart Ford Motor (F). The Detroit giant expertly navigated the boulders flung on the road by the Great Recession, and over the past five years shares have raced higher by more than 200%.
Even in the face of stronger competition from Japanese competitors thanks to a falling yen, Ford has managed to continually see strong earnings and improved sales. The company also recently announced the opening of a $300 million factory in China, which foreshadows its planned expansion in the second-largest economy in the world.
Ford shares aren't likely to deliver as much trading upside as Tesla or CarMax, but if you're looking for a dependable dividend driver that will keep pumping higher despite Big Ben hitting the monetary brakes, then Ford will likely be as reliable as a diesel engine.
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