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What Sales Data Tell Us About Auto Stocks

Kevin Baker

So, what does that mean for automotive stocks and funds in the sector?

The domestic portion showed the worst automotive sales performance since August 1993, at just 11.1 million vehicles. Domestic trucks failed to carry their load, dropping to an annual rate of 6.2 million in March from 6.6 million in the prior month.

Fear that we may already be in a recession, along with other economic problems, likely kept many buyers out of showrooms.

Belt-tightening was not limited to domestic vehicles. Germany's Porsche reported a North American overall sales decline of 24% in March, with 911 sales off 42% and Boxster sales off 49%.

In the last year, General Motors(GM Quote - Cramer on GM - Stock Picks) shares lost 31%. GM is now only barely larger in market capitalization than Harley-Davidson (HOG Quote - Cramer on HOG - Stock Picks), which gave up 32%. Ford(F Quote - Cramer on F - Stock Picks) lost 26%.

The Europeans and Japanese fell less, with Daimler(DAI Quote - Cramer on DAI - Stock Picks) down 12%, Bayerische Motoren Werke(BAMXF Quote - Cramer on BAMXF - Stock Picks) down 16%, Toyota Motor(TM Quote - Cramer on TM - Stock Picks) down 19%, Nissan Motor(NSANY Quote - Cramer on NSANY - Stock Picks) down 17%, and Honda Motor(HMC Quote - Cramer on HMC - Stock Picks) down 11%.

There is no question that the stocks have been beaten down, but "value" is in the eye of the beholder.

One insider does not think we've hit bottom. Ford's marketing chief, Jim Farley, believes that "the second quarter may be the worst sales period of the year."

For trading the auto industry, the saying might go, "Never try to catch a falling engine block." The better way to trade is to wait for the corner to be turned before jumping on board.

In fact, TheStreet.com Ratings' model ranks the Fidelity Select Automotive Portfolio (FSAVX Quote - Cramer on FSAVX - Stock Picks) as "E+," or Sell. Along with the auto manufacturers listed above, just over half the fund holdings are auto-parts makers, with Johnson Controls (JCI Quote - Cramer on JCI - Stock Picks) accounting for almost 21% of fund assets.

If you have a brokerage account that can trade in Paris, check out the EasyETF Automobile that tracks the Dow Jones Euro Stoxx Automobile Index. This is a pure play on European automobile and parts manufacturers that, as an exchange-traded fund, could be sold short. (Be sure you understand currency and short-selling risks before selling short any foreign security.)

The auto industry will not be all doom and gloom forever. Beyond the economic rough ride in 2008 and into 2009, companies such as Nissan, Toyota and Honda plan to continue implementing today's research in higher mileage, lower-emission hybrids the public is demanding. The U.S. Department of Energy awarded Johnson Controls $4.1 million over two years to develop 40-mile range plug-in hybrid batteries to help domestic producers do the same.

Personally, I'm holding out for a solar-powered SUV with a 100-mile "cloudy-day" range for under $40,000. Whichever company mass-produces this car first ought to trounce its competitors.