NEW YORK (TheStreet) -- Keep the pedal to the metal on automaker stocks in 2014.
"I think we are going to have another good year in 2014," says Efraim Levy, equity analyst for S&P Capital IQ. "Even if interest rates increase, I don't think it will have a large impact on demand because the economy is improving and a slight increase in car payments won't stop you from buying a car, especially if you have a new job and you need to get to work."
Levy sees 16.1 million new light vehicles hitting the road in the coming year, a 3.3% rise from last year's estimate of 15.6 million. He expects GM (GM - Get Report) to lead the way in the next 12 months. GM made huge strides in 2013 with the appointment of Mary Barra as its new CEO, as well as Uncle Sam finally selling its stake in the company. Shares of GM finished up 41% in 2013, a full 12 percentage points better than the benchmark S&P.
"We are talking about a company that's solidly in recovery mode," says Levy. "There will be a lot of continuity, but there will also be her imprint going forward, so we expect good things."
Levy is also bullish on GM rival Ford (F - Get Report) which saw its shares rise around 19% in 2013. And he believes Ford CEO Alan Mulally will finish the year at the company, despite rampant rumors that he is a candidate to replace Steve Ballmer at Microsoft (MSFT).
"I'm making the bet that he will be there through the end of year," says Levy. "But even if he leaves, Ford has the bench strength in my opinion to continue their progress and growth."
And while Tesla (TSLA - Get Report) had the best year of any auto manufacturer with its shares rising over 340%, Levy is cautioning investors to hold off on buying the heavily shorted stock due to its nosebleed multiple.
"We like the fundamentals, the story is there and the growth will be there, but right now the valuation is also very much there at over 100 times their 2014 earnings estimate it's kind of pricey."
-- Written by Gregg Greenberg