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5 Auto ADRs to Watch Out For in 2014

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By: Darren Gold
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2013 has been a great year for automobile manufacturers with some of the auto giants seeing unit sales inch back up to pre-recession levels. As macroeconomic conditions improve, global automakers have registered robust sales growth and are ramping up R&D expenditures to keep up with the latest trends. Electric and hybrid cars are high on the list of priorities. At the same time, the luxury segments of major automobile companies are also showing healthy demand. While the ‘Big 2’ from Detroit, General Motors (GM) and Ford (F), have also bounced back with favorable production numbers, Tesla Motors (TSLA) is making serious inroads in the battery-electric vehicle category.

Auto stocks are also up in 2013, on the back of record sales reported in the first three quarters. Global auto sales increased 4% in the first nine months of 2013. Asia-Pacific remains the leading geographic segment for auto giants, with Volkswagen AG (VLKAY), selling over 3.3 million vehicles in Asia in 2012, with the expectation that the number will cross four million in 2013.

The following are the top five auto ADRs to consider for 2014. These are relatively liquid stocks traded on US exchanges, with an average daily value traded of more than $1 million.

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1. Volkswagen AG (VLKAY)

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Founded in 1937, Volkswagen recently emerged as a major player in the global auto industry. Currently, it has a three-year revenue compound annual growth rate (CAGR) of 19%. The company sold just over nine million vehicles in 2012. Volkswagen owns a variety of different automobile brands, ranging from its namesake Volkswagen line, to prestigious names like Audi and Porsche, to Italian super-car brand, Lamborghini. With unit sales growth of 11.2% in 2012, the company plans to spend around $114 billion over the next decade towards expansion and R&D. Volkswagen spends the highest amount on research and development, and its recent focus has been on all-electric vehicles for both the passenger and the commercial market.

2. Toyota Motor Corporation (TM)

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Toyota is the premier Japanese automobile manufacturer, with worldwide sales of 8.8 million in 2012, excluding its Daihatsu segment, which on its own, sold close to a million cars. After suffering a massive blow from the 2010 recall of a number of its models due to sticky accelerator pedals, Toyota Motor Corporation looks set for sales growth in the high single digits for 2013. With worldwide revenues of $267 billion last year, and the highest average daily trading volume in the auto ADRs sector, Toyota stock is definitely one to seriously consider for investment purposes.

3 Daimler AG (DDAIY)

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Daimler AG is the premier German luxury automaker and in addition to Smart, also owns the Mercedes-Benz brand. The company sold slightly less than 2.2 million vehicles in 2012 and has a three-year revenue CAGR of 10.1%. Daimler AG recorded unit sales growth of 12.3% for the last three years. Daimler spent almost $10.3 billion on capex in 2012 and has announced that it is working on new electric models of some of its economy cars, like the B-Class for 2013.

4. Nissan Motor Company (NSANY)

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Nissan has made a strong comeback after seeing units sales plunge during the global recession. The brand has quite a following in emerging countries and the company has subsequently benefitted from its expansion strategy to move into manufacturing in India, Thailand, in addition to China. Revenues have grown at three year CAGR of 12.9%, while unit sales increased 14.6% YoY in 2012 to reach a formidable 4.5 million vehicles.

5. Bayerische Motoren Werke AG (BAMXY)

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BMW, one of the ‘German Big 3’, is a part of an exclusive group of luxury manufacturers that also includes Mercedes-Benz and Audi. It sold around 1.84 million vehicles in 2012, and recorded a three-year revenue CAGR of 11.8%. Vehicle sales for Bayerische Motoren Werke grew 10.6% in 2012. With its new i3 and i8 line of electric vehicles, BMW is the one of the first German car giants to have a production ready all-electric vehicle on the market.

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