Park These 8 Vehicle Stocks in Your Portfolio

From used cars to state-of-the-art electric vehicles and from ATVs to fire trucks and busses, investment experts see opportunities in a variety of stocks related to vehicle production, repairs and sales. Here, several contributors to MoneyShow.com offer eight ideas that may deserve a parking spot in your portfolio. Michael Brush, Brush Up on Stocks Rev Group sells specialty vehicles like fire trucks, school buses, commercial vehicles and RVs. The stock may have tanked in part because management mentioned it is grappling with supply shortages of materials and chassis. This seems like a fixable, or at least a one-off, problem to me that will go away as supply chains adjust coming out of the pandemic. Insiders sure think so. They were substantial buyers in the pullback, and one of them has a good record. The company just reinstated its dividend of 20 cents a share, which works out to a 1.2% yield. This is a nice little kicker at a company that has cyclical and consumer exposure, both important factors for investors right now. Taking a closer look, the firm sells specialty vehicles and aftermarket parts and services. The company has three segments: fire and emergency, commercial, and recreation. Several of its brands pioneered their specialty vehicle categories and date back more than fifty years. So it has brand power, which helps. In most of its markets, it has first or second place for market share. About 62% of sales come from products where it has this kind of share position. The company just upped its full-year sales guidance to 10% growth. REVG also recently changed its capital structure by converting to an asset-based loan revolving credit facility, from a term loan. This will bring down interest costs. Tactics: Consider buying at current levels. There was a sizeable $800,000 broad cluster buy here that included the CEO, CFO, an officer and the general counsel, who has a good record. The strictly speaking buy limit for conservative buyers is $15.90. Douglas Gerlach, Investor Advisory Service America's Car-Mart operates 151 used car dealerships in 12 states. It serves customers with impaired credit or minimal credit histories. Selling used cars and financing them at high interest rates is not a very glorious market niche, but that is part of what makes Car-Mart so interesting. It specializes in a segment of the market that larger players avoid. Most competitors are mom-and-pop, single-shingle operators. Almost everybody needs a car, and Car-Mart is the best option available to some buyers. The company has grown by steadily expanding its dealership network, very occasionally through acquisitions, and has lately concentrated more energy on growing dealership level productivity. The current stimulus-rich consumer environment has been a huge boon to Car-Mart. A shortage of used car inventory has played into the company's hands as well. The company keeps a very conservative balance sheet. Excessive leverage could be deadly in an industry where economic downturns and interest rate fluctuations can cause rapid swings in customers' ability to pay. In the past four quarters, sales increased 23% while EPS more than doubled, yet the shares sport a trailing P/E of just 10. Car-Mart has also reduced its diluted share count by an astounding 20% over the past five years. The triumvirate of revenue growth, operating leverage, and a declining share count has caused EPS to increase more than 17% annually during that span, although we note that current profitability is likely exaggerated in this environment. We model 10% compound EPS growth, which could generate EPS of $24.08 in five years. That figure, combined with a high P/E of 17.4, generates a high price of $419. For a low price, we apply a low P/E of 7.5 to EPS of $10.00. This yields a low price of $75. On that basis, the upside/downside ratio is 3.8 to 1. Steve Reitmeister, Reitmeister Total Return I want to infuse into the portfolio more economically sensitive stocks like those in the materials space. This is usually the part of the market with the most explosive earnings estimates at early stages of an economic recovery. Indeed that is where we stand now. We are adding an allocation to Group 1 Automotive . Why buy this stock? GPI is racing ahead of the pack with their car sales. This outperformance is likely to last when you see the garage full of strong POWR Ratings -- an A rating overall and in the top 2% of all stocks. This is on the back of a gangbuster tandem of A ratings for both Growth and Value (my 2 favorite ratings). On the growth front they just put up a 25% earnings beat that got analysts scrambling to raise estimates for this year and next. This also helped prop up the value story as analysts now believe shares are worth $224 on average while the 5-Star analyst from Merrill Lynch believes that $305 is it's rightful parking spot. This gives us ample reason to get behind the wheel of these auto dealer shares at the current price closer to $160. Stephen Leeb, The Complete Investor Penske Automotive Group has recently outgrown its small-to-mid-cap designation by virtue of being the country's fastest-growing auto dealer. Earnings since 2008 have grown more than eight-fold, an annualized rate in the high teens. The company's eponymous leader is known for having assembled one of the most successful teams in race car history, with a record number of victories at the Indy 500 under his leadership. But the company owes its leadership position less to the racing skills of its founder than to the skillful management of its auto brands. Since 1967, Penske has been the No. 1 Toyota dealer in the U.S. Its flagship Longo Toyota dealership in California is the world's largest dealership, spanning 50 acres. The company also represents Mercedes Benz, Lexus, and other premium brands along with U.S. automakers like Ford. Several factors should continue to push earnings higher. A likely permanent effect of the pandemic will be fewer automotive inventories, resulting in higher margins for dealers. For some time, used-car sales have been rising faster than new-car sales, an advantage for Penske thanks to its strong relationship with Toyota, which has a leading entry in virtually all categories of used cars. Penske also sells trucks. We expect Penske's profit growth to remain in double digits in the waning days of the internal combustion engine and to not miss a beat as EVs eventually take over. Despite the strong stock gains, the company's value metrics remain compelling, as earnings have kept up with share price gains. Penske is a stock that checks the boxes for both value and growth alike. David Fried, The Buyback Letter O'Reilly Automotive is a leading DIY (do it yourself) and DIFM (do it for me) business, with products for domestic and imported cars, vans and trucks. At the end of 2020, ORLY operated 5,616 stores, with some 77,000 employees. It's a favored stock right now because as the U.S. takes steps to recover from the pandemic, auto parts retailers are looking sweet. Think about it -- mobility increases nationwide as people get vaccinated, and they want to travel. The total mileage driven by drivers is starting to pick up as people come out of a year's hibernation. Cars will need non-discretionary maintenance, and retailers such as O'Reilly can pass along whatever costs of inflation might be present, and still make a profit. They have pricing power, and the demand for ORLY's products is recession-resilient. O'Reilly was a winner last year despite the pandemic's disruption; 2020 was the 28th consecutive year that O'Reilly boasted comparable sales growth, which demonstrates the company's long history of success, no matter the state of the overall economy. ORLY has a great record of positive earnings surprises. For the current fiscal year, ORLY is expected to post earnings of $24.05 per share on $12.01 billion in revenues. For the next fiscal year, the company is expected to earn $27.14 per share on $12.46 billion in revenues. Share repurchases during Q1 were 1.5 million shares ($665 million). In the last 12 months, management has reduced shares outstanding by 4.244%. John Buckingham, The Prudent Speculator Volkswagen AG (VWAGY) is the second largest car manufacturer in the world. The group's family of brands cover the spectrum from inexpensive SEAT and Skoda, to mid-level Volkswagen, high-end Porsche and Bentley, and supercar manufacturers Lamborghini and Bugatti. VW was quick to pivot away from combustion engines as a result of its diesel emissions cheating scandal in 2015, for which the company was heavily penalized and ultimately forced to take on electric vehicle (EV) projects more quickly than originally planned. We believe that Volkswagen is #2 behind Tesla in electric vehicle development, with a solid chance to overtake Elon Musk's carmaker. With investors clamoring for often-profitless stocks in the space, we would opt for a value-priced EV leader. Bankrolled by enormous profits at Porsche and with strong EV urgency thanks to the expansion of European congestion and clean-air rules, earnings are expected to rebound from 2020's 1.78 euros per VWAGY share to more than 2.70 euros of EPS in 2021, and 3.40 euros in 2023. Jon Markman, Pivotal Point Ford Motor Co. is transforming from a boring Rust Belt car company to a digital tech titan. A major transition is underway as all of the leading manufacturers shift from internal combustion engines (ICE) to electric power plants. When it arrives in 2022, the new Lightning -- an electric version of their famous F-150 pickup truck -- will sit side by side with the gas- and diesel-powered F-150s that have been the best-selling vehicles in America since 1981. Yet Lightning, starting at less than $40,000, will clearly be the best of the breed in terms of towing capacity, torque and flat-out acceleration. Even with its massive 6,500-pound bodyweight, Lightning is still capable of bolting to 60 mph in a sportscar-like mid-four second range. Lightning represents where Ford is headed. It means analysts will shift to new valuation metrics that will make the old industrial giant assessed more like a tech company. The share price is now a reflection of new technology development metrics like EV plant conversions, partnerships for charging networks, batteries and autonomous driving. Savvy long-term investors should consider buying. Ben Reynolds, Sure Dividend Polaris was founded in 1954 and is headquartered in Minnesota. It designs, engineers, and manufactures snowmobiles, all-terrain vehicles (ATVs) and motorcycles with 30+ brands including Polaris, Ranger, RZR,Sportsman, Indian Motorcycle, Slingshot, and Transamerican Auto Parts. Polaris enjoys a competitive advantage through its brand names, low-cost production and long history in its various industries, allowing the company to be the leader in ATVs and number two in snowmobiles and domestic motorcycles. During the last recession, Polaris generated earnings per share of $1.75, $1.53, and $2.14 in 2008 through 2010. From 2008 through 2018, Polaris was able to grow EPS by an average compound rate of 14% per year. However, growth fell off dramatically in 2016 as the company dealt with recalls and restoring confidence in the brand. We forecast 5% annual growth. We expect Polaris to generate EPS of $9.10 in 2021. Based on this, the stock is trading at a price-to-earnings ratio of 13.7. Our fair value estimate is a P/E of 16.0, which means expansion of the P/E multiple could increase returns by 3.1% per year. When combined with the 5% expected growth rate and 2% yield, total return potential comes to an attractive 10% per year.

Park These 8 Vehicle Stocks in Your Portfolio

Get beyond the wheel of these top picks involved in auto sales, repair and production.

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