Gear Up for Big Profits in These Auto Stocks

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Now that GM and Chrysler are bankrupt and hemorrhaging sales, a select group of auto stocks will step into the void to gain market share and see huge growth in 2010.

The December sales figures released on Tuesday showed the best month for automakers since the August boom caused by "Cash for Clunkers." This is extremely significant since it shows that pent-up demand is catching up with consumers and that the worst may be over for auto stocks that weathered the downturn successfully.

Here are my top auto stocks to buy now.

Auto Stock #1 - Honda Motor Co. ( HMC )

Honda ( HMC ) is Japan's second-largest automaker (after Toyota) and the world's largest motorcycle manufacturer. Honda's name is synonymous with fuel efficiency and products include the Civic, Element and other iconic vehicles - but also top-notch motorcycles, ATVs and even lawn mowers. This diversification allowed Honda to stay profitable even as vehicle sales slumped in early 2009, and is supercharging returns now that sales are picking up. The latest numbers show Honda sales topping forecasts and growing significantly worldwide - including a stunning 97% jump in Japanese sales over last year!

Auto Stock #2 - Thor Industries ( THO )

Not your typical vehicle maker, Thor ( THO ) specializes in small and mid-sized buses. Its key customers are local governments, but also include rental car companies and hotels that have their own private transportation needs. As the recession has taken hold, many municipalities and businesses are seeing less revenue and are opting to delay the purchase of bigger buses in favor for Thor's smaller and more affordable coaches. The company has grown its profits considerably in each of the past three quarters, and I expect another strong showing when THO releases Q4 numbers in the coming weeks.

Auto Stock #3 - Kandi Technologies ( KNDI )

Another unconventional auto stock, China's Kandi Technologies ( KNDI ) is a small company that designs and manufactures all-terrain vehicles, motorcycles and scooters. The company does the majority of its business in Asian urban centers, where motorcycles and scooters are staples since they are more affordable to consumers with lower income and provide greater mobility and fuel efficiency than cars. This stock has explosive potential, with shares more than tripling since October. However, it's a microcap stock that is thinly traded, so please use a limit order when you buy to prevent from overpaying for shares.

Auto Stock #4 - Ford Motor Co. ( F )

Back in March, shares of Ford Motor Co. ( F ) bottomed out at around $1.50 per share, but Ford has not only struggled back to profitability recently but has managed to show an impressive rate of growth that could put it in a position for huge gains in 2010.

The third quarter marked Ford's first quarterly profit since the beginning of 2008, and the company has consistently blown away Wall Street's pessimistic forecasts for each of the last three quarters. The naysayers may be saying that consumer spending remains relatively weak, and that Ford shares will continue to suffer, but don't believe it. The December auto sales released on Tuesday show continued growth for Ford as it eats into the market share of its competitors. Ford reported an increase of 32% in its sales for December compared to last year, while GM and Chrysler saw significant drops. What's more, auto sales in general are growing. Yesterday's final figure of about 1 million vehicles sold in December marks the second-best month of 2009 after August, showing that the industry is looking up for the New Year.

In a nutshell, Ford is raking in a bigger percentage of sales even as total vehicle sales are growing. The icing on the cake is that Ford will report its fourth-quarter earnings at the end of January, and I expect another strong showing. My analysis indicates that a number of Wall Street experts have revised their estimates for the company higher, which typically indicates a stock is going to top forecasts.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: F , HMC , KNDI , THO

Louis Navellier

Louis Navellier

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