The housing market is sputtering, and geopolitical issues have many of the world’s markets teetering. But there’s one reliable sector we can keep coming back to—the trusty American automobile industry. While some experts think the the industry may be peaking (see our last blog item), last week the auto industry posted what was considered very strong July sales: more than 1.4 million vehicles, a 9.1 percent gain over July 2013. The hot July sales put the industry on track for “the best showing since 2006,” according to the Los Angeles Times.
It’s all about the strengthening U.S. economy, or at least the perception of that among American families, according to the Times report. There was even some better news from the housing industry, which happens to also be a good source of jobs.
Playing into the recovery in the auto market, of course are several other very important factors such as July auto sales discounts, incentive programs and, perhaps most importantly, low interest rates. Zero percent financing for loans of 84 months or even more, unheard of in past years, is now common. “You can’t underestimate how important dealer financing has been to this automotive recovery,” Edmunds.com analyst Jessica Caldwell told the Times.
While many experts see this as a great time for buying cars—and car-related stocks, again we should remind you that others say this is a cycle that is running out of gas, and it may be time to sell auto stocks. That was the opinion of Morgan Stanley analyst Adam Jones who told the Times that “this alignment of factors makes us want to head in the opposite direction.”
So while we recommend buyer beware, here’s a look at some of ramdom small cap auto industry stocks:
Autobytel (Nasdaq: ABTL), based in Irvine, CA, is an automotive marketing services company that works with dealers, manufacturers and automobile buyers generating leads and advising on financing, among other services. It just posted second quarter revenue of $25.9 million, up 46 percent over last year but down from the $27 million analysts expected. President and CEO characterized the quarter as “solid” due to “favorable conditions in the automotive market…” The company guided to a revenue increase in the third quarter of 22%-26% over last year. ABTL closed Aug. 8 at $8.16, down 26 cents on the day with a market cap of $73.7 million. Its 52-week trading range is $5.80–$18.82.
TrueCar Inc. (Nasdaq: TRUE), based in Santa Monica, CA, operates the popular TrueCar.com that, among other things, provides market data for buyers including information on pricing for specific makes and models based on what other buyers actually paid for a similar vehicle. TRUE recently reported record second quarter revenues of $50.5 million, up 62 percent over last year’s second quarter. TRUE closed Aug. 8 at $13.52, down $1.14 on the day with a market cap of $960 million. Its 52-week trading range is $9.05–$15.85.
Remy International (Nasdaq: REMY), based in Pendleton, IN, is a global vehicular parts designer, manufacturer, marketer and distributor of aftermarket and original equipment electrical components for automobiles, trucks and other vehicles. It sells its products under the well-known Delco Remy, Remy and World Wide Automotive brands. REMY recently reported second quarter net sales of $299.3 million, an increase of 6 percent year over year. “Our top line growth strategies are succeeding,” said President and CEO Jay Pittas. REMY closed Aug. 8 at $21.20, down 9 cents on the day with a market cap of $678 million. Its 52-week trading range is $18.05-$27.30.