Value runs on four wheels. According to Morningstar analysts, in fact, the stocks of auto manufacturers are among those which, in 2016, could help to inflate investors' pockets. Many of the companies we cover do not have a competitive advantage (the so-called economic moat), however we believe this will not prevent their stocks from generating alpha,” said David Whiston, equity strategist in the auto sector at Morningstar. “It is true that these companies work in a cyclical sector which requires heavy investment. But they can still increase profit margins, and ignoring their potential would be a mistake.
It must be said that the moment for the auto sector is not brilliant. Worldwide registrations in the first nine months of the year grew by 1,2% (Morningstar elaboration on data from international manufacturers' associations) but remained below expectations (Morningstar forecasts: +3%). Emerging markets were the weakest. This has mitigated the positive global impact of Europe's growth.
As for Italy, one more working day in November pushed the demand for new cars to 134.021 units with a growth of 23,5% compared to November last year (Unrae data). In the eleven months, the cars sold showed an increase of 15,5% with 1.464.747 registrations, consolidating the projection of growth at the end of the year of over 200.000 units compared to 2014, to approximately 1.570.000 cars sold. The analysis of the market structure in November indicates a trend in private purchases in line with the market.
WHO SPEEDS UP
Looking at a macro-regional level, demand in Europe was surprisingly strong in 2015, with light vehicle registrations expected to close the year with growth of between 7 and 9% compared to Morningstar's January forecast (3-5%). As for the future, many will depend on the measures that the various states will be able to launch to stimulate employment, on the aftermath of the Volkswagen scandal and on the climate of fear created by the recent terrorist attacks in France which could reduce the desire to spend families. “Our estimates are for 5-7% growth in 2016,” Whiston says.
The eyes of industry experts and investors continue to be focused on China which, since 2009, has been the engine for the growth of the segment. Another traction could come from the government's decision to lower taxes on certain types of new vehicles. “This could allow that country's market to grow by 3% in 2016,” explains the Morningstar analyst.
WHO BRAKES
The United States (always one of the most important countries for four-wheelers), for their part, could show some problems. Demand, with 17,4 million vehicles sold, may have peaked. To this it must be added that the producers' plants are already working at their maximum capacity. “If demand were to grow further, they would have to invest in expanding factories, which would have a major impact on earnings,” Whiston says
Brazil is a special case. The South American country has always been an important market for four-wheelers, but for some years it has been dealing with a difficult macroeconomic situation. One result was that new car sales fell 25% in 2015. Morningstar estimates point to a further 10-21% slide over the next year.
Attachments: Source: Morningstar.it
