A mainstay of the American economy, the auto industry, is firing on all cylinders. September sales at Ford (F) accelerated 23% from a year earlier, General Motors' (GM) rose 13%, while Fiat Chrysler's (FCAU) shifted into a higher gear with an uptick of 14%. Additionally, Toyota (TM) experienced a 16% gain and Honda (HMC) 13%.
The Wall Street Journal said of the industry, "U.S. auto sales accelerated to a blistering pace in September... and put the overall auto industry in a position to achieve its best year of sales since 2000."
Now's a good time to hop in and move into the investors' fast lane by adding two American carmakers to your portfolio: Ford and General Motors. Not only are they among those at the front of the pack in their industry, but one of my guru strategies, that of James P. O'Shaughnessy, views these names as likely leaders over the finish line. I created these guru strategies by automating the methodologies employed by some of history's great investors, including O'Shaughnessy, Warren Buffett, Peter Lynch and Benjamin Graham.
The O'Shaughnessy strategy judges stocks by looking for those companies with market caps over $1 billion, cash flow per share greater than the mean of the market cash flow per share, outstanding shares that number more than the market's average (which is 636 million shares) and trailing 12 months sales at least 1.5 times greater than the market's mean.
To earn the strategy's highest accolades, a stock must pass all four of these tests, which Ford and General Motors do with flying colors. Among stocks that pass these tests, however, there is one more test: dividend yield. The 50 stocks with the highest yields earn the highest recommendation. Ford and General Motors, with recent yields at 4.42% and 4.80%, respectively, are among this top-50 group.
Both companies have strong market positions and strong performance records in recent years. With the O'Shaughnessy strategy's endorsement, they also are on the inside track to be among the industry's frontrunners.
