Three Picks for Zooming Auto Sales

12/02/2010 3:13 pm EST

Focus: STOCKS

Louis Navellier

Editor, Blue Chip Growth and Emerging Growth

Louis Navellier, editor of Blue Chip Growth, recommends an aftermarket supplier, a parts manufacturer, and India’s leading car maker as US sales recover while Asia’s continue to boom.  

O’Reilly Automotive (Nasdaq: ORLY) is one of the largest specialty retailers for aftermarket parts, automotive tools, and professional service equipment in the US. The company has more than 3,400 locations throughout 38 states as well as a lucrative online store.

The company caters to both do-it-yourself customers and professional installers, selling everything from new and remanufactured auto parts (such as alternators, fuel pumps), maintenance items (oil, antifreeze), accessories (floor mats, seat covers) and auto body paint. The company also specializes in locating hard-to-find parts, making them a go-to choice for car enthusiasts.

In the third quarter, the company’s same-store sales rose 11% and overall sales rose 13%. During the same period, earnings rose 30%. The stock posted a 16% earnings surprise!

Thirteen analysts have revised their earnings estimates higher in the past month. This is a great sign for the company, because when the analysts get aggressive with their revisions, we tend to see an even bigger surprise. ORLY is a buy under $64. [Shares recently traded below $62—Editor.]

Magna International (NYSE: MGA), our new buy for November, has already gained about 8% for us so far. The automotive company’s impressive third-quarter report drew investors in over the last month. Sales increased 27%. Magna’s earnings surged to $2.06 per share, crushing analysts’ estimates of $1.51 per share and posting a 37% surprise.

Overall, it was a great third quarter. The company also announced a 2-for-1 stock split and increased its dividend by 20% to $0.36 per share. I am raising my buy-below price to $51. [Shares traded nearly 4% higher Dec. 2, approaching $52 after the split. For more on Magna, see Navellier’s piece from last month.—Editor.]
 
Tata Motors (NYSE: TTM), India’s largest car manufacturer, has had a very profitable few months, and the outlook for 2011 only looks brighter.

Tata shares are up 13% in a month. The company reported excellent sales and profits for the last quarter, which helped boost the share price. Earnings were $497 million for the quarter, up from $4.9 million last year, and sales increased 37% to $6.4 billion.

Demand for automobiles in India continues to increase and Tata will definitely be cashing in on this trend. I suspect 2011 to be another record-breaking year for the company. Continue to buy the stock under $36. [Shares traded just above $31 in New York on Dec. 2—Editor.]

[Looking for more ways to cash in on the US automotive revival? Jim Jubak recently recommended another supplier to the automakers in Detroit and Asia.]

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