Best auto stocks for 2020: Top 7 Automotive Stocks

The 7 best auto stocks to watch in 2020.

Automotive stocks are famously cyclical, tending to boost or decline with the wider economic system as consumers ramp up or rein in massive purchases in accordance with their financial situation.

The auto industry has slowed in recent years regardless of the noticeably rosy global economy, and Wall Street has – generally speaking – been surprisingly pessimistic on the space for a couple of years now, valuing auto-centric companies at conservative multiples in anticipation of a worsening economy.

But are these valuations deserved?

The following names are among the best auto stocks in 2020, as trends like electric powered vehicles, self-driving cars and demand from China increasingly come into focus.

Honda Motor Co Ltd NYSE: HMC

Seemingly undervalued by all fundamental metrics, Honda honestly doesn’t get the love it deserves from Wall Street.

The Japanese industrial giant, established in 1946, trades at just 10 times earnings, 8.8 times forward revenue and a ridiculous 0.64 times book value. That alone has to make HMC one of the first-rate auto stocks of 2020.

For the unconvinced, the company has raised its dividend in eight of the last 9 years and management expects to buy back around one hundred billion yen well worth of stock in fiscal 2020, which works out to simply shy of $1 billion.

Honda’s underlying business is extremely stagnant, however at these levels, and while paying a 3.7% dividend, HMC can’t be overlooked.

Douglas Dynamics Inc NYSE: PLOW

While not an out-and-out automotive stock per se, the $1 billion Milwaukee-based Douglas Dynamics is, as its ticker symbol indicates, a snowplow company – at least in part.

Douglas Dynamics sells truck attachments like plows, salt-spreading equipment, and different snow and ice management equipment.

Its work truck solutions segment is a go-to for plumbers, cable companies, landscapers, towing businesses and construction companies – for practically any commercial reason you’d want to augment your vehicle, Douglas Dynamics can do the job.

PLOW is doing a great job because revenue has gone up from $300 million in 2014 to an predicted $561 million in fiscal 2019. Shares pay a 2% dividend.

Toyota Motor Corp NYSE: TM

If you’re getting to know the best auto stocks of 2020 it’s impossible not to run into Toyota.

Toyota is without a doubt the single most valuable auto company on earth.

That said, TM stock may honestly be undervalued, with shares trading for much less than 10 times free cash flow and a price-earnings-growth ratio of 0.8.

Yes, many different large carmakers are seeing slightly lower income and experiencing softness in the market, however TM saw revenue rise by 4.2% in the latest six-month period. To its credit, and regardless of its size, Toyota is serious about innovating.

Toyota aims to emerge as a mobility company and is investing heavily in connectivity, electric powered automobiles and AI-powered self-driving capabilities.

TM pays a 2.6% dividend.

VOLKSWAGEN AG/ADR OTCMKTS: VWAGY

Volkswagen is the second-most valuable automobile company in the world, so it’s no surprise it’s earned a spot as one of the best auto stocks of 2020.

In China, now the biggest auto market on earth, vehicle deliveries rose 1.7% in 2019 despite an genuine decline in the broader market.

Overall deliveries rose by 1.3%, and the organization managed to develop its market share in every region globally.

Far from a one-trick pony, Volkswagen’s portfolio of brands consists of Audi, Porsche, Lamborghini, Bugatti, Ducati and Bentley.

As the broader market weakens, a strategy of focusing on its pricier, higher-end brands worked last year, with Porsche deliveries up 10% and Lamborghini sales surging 43%.

Tesla Inc NASDAQ: TSLA

No list of the best automotive stocks of 2020 is complete without the industry’s sweetheart, the attractive underdog everyone loves to love: Tesla.

No car company on earth has the mixture of size and growth that TSLA does.

Within the three months between October 2019 and January 2020 shares doubled, as record quarterly delivery numbers and also the opening of a Tesla Gigafactory in China sent its market cap to almost $100 billion.

Tesla’s first-mover advantage in autonomous electric powered vehicles continues to be paying off, and analysts expect roughly 25% revenue growth in 2020.

Competitors to the Model S, just like the Porsche Taycan, are beginning in 2020, but the Taycan still falls short on zero to 60 time (3.8 vs. 3.7 seconds), range (253 vs. 373 miles) and price ($103,800 vs. $79,900).

Tata Motors Limited ADR NYSE: TTM

Among the top automobile stocks for the 2020s is Tata Motors, the India-based multinational, including some geographic diversity to the list.

The $10 billion Tata’s asset is Jaguar Land Rover (JLR), a segment with two world-renowned brands.

This prized possession offers much-needed balance and pricing power, especially given Tata Motor’s weakening stand-alone India business.

JLR shined in Tata’s final reporting period though, with sales of the Range Rover Evoque up 54% and JLR unit income in China up 24%.

A cost-cutting and profitability plan known as Project Charge aims to deliver a £1 billion improvement in costs and earnings in fiscal 2020.

Analysts are expecting strong profits growth from TTM within the years ahead as these efforts progress.

Penske Automotive Group, Inc. (PAG)

Automotive and commercial truck dealer Penske Automotive rounds out the list of the highest-paying auto stocks for 2020.

As the wider industry scrapes by, PAG is diligently growing sales, buying lower back stock and boosting its dividend.

Although revenue increase isn’t predicted to maintain this pace up all through 2020, sales rose 5.5% last quarter and would’ve risen 7.7% if it weren’t for negative foreign exchange movements.

The organisation currently uses simply 30% of earnings to pay a 3.3% dividend, and PAG has raised its payout annually for the last eight years.

Trading at just 9 times earnings, this $4 billion auto dealer with consistent outcomes shouldn’t be written off.