This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Take Profits on Auto Sector Strength

NEW YORK ( TheStreet) -- Last week the auto industry reported that June auto sales came in at the fastest pace in six years. Between July 23 and Aug. 9 the 10 auto makers I profile today report their quarterly earnings. The key will be the revenue line and forward guidance to judge whether or not the sales gains can be sustained.

On July 2 when I wrote, Sector Ratings Set Asset Allocations, I gave the autos-tires-trucks sector an 'avoid-source of funds' asset allocation rating. Today, following benchmark revisions to ValuEngine data, the autos-tires-trucks sector consists of 94 stocks with only two rated buy. The number of sell-rated stocks declined to 31 from 67 which justifies an asset allocation upgrade to underweight. This assessment still justifies profit-taking on strength in the sector. Seven of the autos I profile today are rated hold, while the other three are rated sell.

Higher U.S. Treasury yields should have a negative effect on auto and truck sales as rates on auto loan rates rise. Auto loan default rates have been inching up recently, which could become a drag on auto sales in the second half of 2013.

An interesting observation among these stocks is the different price patterns among the American auto companies compared with European and the Japanese stocks. Ford Motor (F - Get Report) set a multi-year high on Friday with General Motors (GM - Get Report) close behind. Some of the European based manufacturers peaked in the first half of 2013; others peaked in early June. Meanwhile the Japanese auto makers peaked with the major U.S. equity averages around May 22.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
FIATY $8.98 0.84%
DDAIF $97.27 2.89%
F $15.90 0.82%
GM $35.78 0.53%
HMC $36.22 -0.38%

Markets

DOW 18,037.97 -42.17 -0.23%
S&P 500 2,108.92 -8.77 -0.41%
NASDAQ 5,060.2460 -31.8390 -0.63%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs