Auto Stocks In The New World

It was quite funny just last week at the White House Correspondence Dinner when President Obama joked about how the magazine "Car and Driver" named him the "Auto Executive of the Year".

This was one of his better jokes at the always tongue and cheek banquet.   After he saved the US Auto industry with bailouts, pressured the CEO of GM out and being first President to ever make such a strong sales pitches for their US automobiles; he really deserved to be "Auto Executive of the Year".  

Then on Tuesday Obama announced that the autos would need to meet stricter emissions standards by 2012, with the goal of all cars getting 39 miles per gallon by 2016. That would be the equivalent of taking about 177 million cars off the road.  

He won't be "Auto Executive of the Year" no more.   This basically assured bankruptcy for General Motors (GM), and not exactly great news for Ford (F) either, with a lot of their revenues coming from trucks.   The estimated cost to the auto industry will be about $47 billion.    

(GM) has actually been up 20% since then announcement on speculation that they may be able to make these necessary adjustments and be able to be a viable long term.  Ford (F) on the other hand has been volatile, and down about 4% since the announcement. Both of these stocks are not quality long term investments due to their incredible weakness right now.       

Who are the big winners from this announcement?

Toyota(TM) and Honda (HMC) is way out in front of the American car manufacturers in this area. Both are much more capable of producing a lot of cars that meet these mileage standards and are much better at fuel efficiency technology (amongst other things) than the US automakers. 

Honeywell (HON), Eaton (ETN) Borg Warner (BWA) Johnson Controls (JCI) are winners in this announcement due to the fact that they are producers of things like fuel efficient engines and batteries used in hybrid engines.    The announcement came as no surprise, so the projected increased sales revenues have already been priced into many of these stocks, but never the less these are companies to keep an eye on for the future. 

O' Reilly Automotive (ORLY), AutoZone Inc (AZO) and Advance Auto Parts Inc (AAP) have all established a nice defensive relationship with the market. (Check out Sean's great article in regards to these stocks) When the market was tanking earlier this year, these stocks jumped, so they should continue to be good earners and stable stocks as we watch the economy and stock market unfold. . If the market tests it old lows these stock should hold on!