I went to go see John Murphy, Merrill Lynch's auto analyst today. He is very bullish on the industry, somewhat to my surprise.
However, it's not so much of an economic recovery story as it is simply numbers.
As John noted, a year ago the industry was in terrible shape. Credit was basically unavailable to potential car buyers. General Motors and Chrysler were in the process of being taken over by the US government. And the stock market was in a free-fall (even though it has since rallied +70%).
Not surprisingly, no one was buying cars. As 2009 progressed, dealer inventories were run down, as dealers were reluctant to add new models in the face of 10% unemployment rates.
And yet Americans kept driving their cars, so the U.S. car fleet just kept getting older.
So now auto sales are picking up, and dealers are rebuilding stocks. Even Toyota had sales up +40% YOY for the first 10 days of March.
This is a tough group to play from the stock side, because you not only have to buy at right time but you also have to know when to sell. It's the latter point that gets me - selling when the news is good is just counterintuitive, but if you're going to buy cyclical stocks that's what you have to do.
In any event, Clusterstock carried a chart illustrating the recovery in the industry.
CHART OF THE DAY: Detroit's Amazing V-Shaped Recovery
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