PowerTrends in Trucks and Cars

08/13/2014 7:00 am EST


Chris Versace

Editor, PowerTrend Bulletin, Growth & Dividend Report, and PowerTrader

Concerns among investors have ratcheted up amid tensions between Israel and Hamas, Russia, and airstrikes against Islamic militants in northern Iraq, observes Chris Versace in PowerTrend Profits.

It just goes to show that while you tend to think revenues, earnings, and economic data are the drivers of businesses and stock prices, international tension can come along and serve up a healthy plate of disruption and uncertainty for stocks.

The latest American Association of Individual Investors sentiment poll showed a move in bearishness to its highest level in nearly a year, but those peaks tend to reflect recent pullbacks and—as history has shown—buying opportunities.

During periods of increased volatility, the natural reaction for some investors is to panic sell, while others sit on the sidelines. The prudent investor will look at the fundamentals and wait to strike if the risk-to-reward tradeoff becomes favorable, if not compelling.

We see opportunities in oversold companies like our two transportation-related recommendations—Paccar (PCAR) and General Motors (GM).

GM shares have returned to oversold levels, even though July auto sales were the highest they have been in years. General Motors, still the largest US automaker, said its July sales rose 9.4% over a year earlier to 256,160, driven by a 22% increase from its GMC truck and sport-utility brand.

That’s a favorable mix of sales for the company’s bottom line. European car sales are also zooming. Therefore, let’s improve your GM cost basis by adding to your position at current levels.

Much like GM, Paccar continues to benefit from the aged truck fleet, and orders for that equipment have been robust.

While not quite in oversold territory, Paccar shares are close, even though the outlook for manufacturing activity looks solid given the ISM Manufacturing and PMI reports. Let’s be sure to scale further into PCAR shares today and improve our profit potential in the coming months.

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