General Motors announced production shutdowns at several North American plants and Ford announced additional shutdowns at two plants, the latest disruptions in the automotive supply chain due to a shortage of chips.
Shares for GM fell 1% on Thursday, the day of the announcement. Ford closed almost 2%.
Both inventories are up more than 40% this year, despite ongoing production problems.
JC O’Hara, chief market technician at MKM Partners, identified a way to gain exposure to the auto stocks without the risk of headwinds.
“Used car sales are going through the roof, so one play I’m really interested in here is CarMax. They are a huge used car sales business and the positivity of used car sales is reflected in the chart said O’Hara. CNBC’s “Trading Nation” on Thursday.
CarMax is up more than 100% in the last 12 months. Shares are up 36% this year.
Gina Sanchez, chief market strategist at Lido Advisors and CEO of Chantico Global, warned that the shortage of chips is “something that is unlikely to go away”.
With Ford and GM moving to electric vehicles, Sanchez noted, “ the outlook for Ford is significantly better than GM based on the idea that they are really entering the space of electric cars, but what’s interesting is that electric cars are more need chips, no less. “
“Suppliers just didn’t stock up on chips because the demand for cars plummeted during Covid, and now they’re just on the wrong track, and it’s not that easy to just order more chips,” she said in the same interview. “This will likely take several months to work through and will dampen the auto industry’s recovery.”
Still, O’Hara said GM and Ford could provide a more stable opportunity for long-term investors versus more volatile electric vehicle manufacturers like Tesla.
“We have a chance to move to names with lower volatility. GM and Ford, which are now considered EV games. I think you get a pullback and I think that pullback is for sale,” O said. Hara.
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