Friday, April 8, 2011

Run from (F) (GM) (TM) HMC) Says Citigroup (C)

Saying the supply chain of the auto industry is damaged worst than being accounted for by investors, Citigroup (NYSE:C) recommends investors to stay away from auto stocks like Ford (NYSE:F), Toyota Motors (NYSE:TM), Honda Motor Company (NYSE:HMC) and General Motors (NYSE:GM).

Citigroup said, “While some investors may be tempted to position for a recovery in H2 and out, the full extent of damage to the supply chain and production disruption from the power outages [in Japan (NYSE:EWJ)] is being underestimated by the market, and we would avoid the sector as things stand.”

The giant bank has updated their ratings on the major automakers to "Sell."

I think in this case, as far as the disruptions in parts supply, Citigroup is right. It just sounds too positive out there, as if with a wave of the hand everything will just turn around and Japan will quickly right itself. We'll find out soon enough. The supple issue needs to be watched much more closely by investors, and that will probably only be known by shutdowns, as the auto industry in many cases still won't reveal what parts are in fact they're having trouble getting.

On a secondary note, investors in Sirius XM (NASDAQ:SIRI) need to include this as part of their decision-making process, as Sirius is totally dependent upon the health of the auto industry for its own growth.

Ford was trading at $15.36, falling $0.16, or 1.06 percent, as of 1:20 PM EDT. Toyota was at $78.10, gaining $0.89, or 1.15 percent. Honda was trading at $34.75, up $0.55, or 1.61 percent. General Motors was down to $31.69, dropping $0.62, or 1.92 percent.

2 comments:

Anonymous said...

Why GM? Parts come from Japan?

Anonymous said...

Citi still has a buy rating on GM and a price target of $50? Get with the program writers and stop passing bad information to the public!