Chip scarcity disrupts auto manufacturing, however dealer has one hedge play
Shares for GM have been down 1% on Thursday, the day of its announcement. Ford closed down practically 2%.
Each shares have risen greater than 40% for the yr, regardless of the persevering with manufacturing points.
JC O’Hara, chief market technician of MKM Companions, recognized one solution to get publicity to the auto shares with out the headwind threat.
“Used automotive gross sales are by means of the roof so one play that I am very concerned with right here is CarMax. They’re an enormous used automotive gross sales firm, and the positivity from used automotive gross sales is being mirrored within the chart,” O’Hara informed CNBC’s “Buying and selling Nation” on Thursday.
Gina Sanchez, chief market strategist at Lido Advisors and CEO of Chantico International, warned that the chip scarcity is “one thing that is in all probability not going away.”
With Ford and GM shifting into electrical autos, Sanchez famous, “the outlook for Ford is considerably higher than GM, primarily based on the concept that they’re actually shifting into the electrical automotive area, however what’s attention-grabbing about that’s that electrical vehicles are going to require extra chips, not much less.”
“Suppliers simply didn’t stockpile sufficient chips as a result of auto demand plummeted throughout Covid, and so now they’re simply caught on the unsuitable foot, and it is not really easy to simply order up extra chips,” she mentioned in the identical interview. “That is going to take in all probability a number of months to work by means of, and it will dampen the restoration for the auto sector.”
Nonetheless, for long-term traders, O’Hara mentioned GM and Ford may current a extra steady alternative over extra unstable electrical automobile makers similar to Tesla.
“We have an opportunity to maneuver into decrease volatility names. GM and Ford, who are actually checked out as EV performs. I believe you’re going to get a pullback and I believe that pullback is buyable,” mentioned O’Hara.