General Motors has announced a production shutdown at several North American plants, and Ford has announced additional downtime at two plants, the latest car supply chain outages due to a lack of chips.
Shares for GM fell 1% on Thursday, the day of its announcement. Ford closed almost 2%.
Both stocks grew by more than 40% for the year, despite continued production problems.
JC O’Hara, chief market technician at MKM Partners, has identified a way to gain exposure to car stocks without the risk of wind.
“Sales of used cars are on the roof, so one game I’m interested in here is CarMax. I’m a huge used car sales company, and the positivity in used car sales is reflected in the graph,” he said. O’Hara told CNBC’s Trading Nation on Thursday.
CarMax has collected over 100% in the last 12 months. Shares rose 36% this year.
Gina Sanchez, chief market strategist at Lido Advisors and CEO of Chantico Global, warned that the lack of chips is “something that will probably not go away.”
With Ford and GM moving into electric vehicles, Sanchez noted, “the outlook for Ford is significantly better than GM, based on the idea that it is really moving in the space of electric cars, but what is interesting in this regard is that cars electric ones go to require more chips, not less. “
“Suppliers simply did not store enough chips because car demand fell during Covid, so now they are just caught on the wrong foot and it is not so easy to order more chips,” she said in the same interview. “This will probably take several months to resolve and will slow the recovery for the automotive sector.”
However, for long-term investors, O’Hara said GM and Ford could offer a more stable opportunity to more volatile electric vehicle manufacturers such as Tesla.
“We have a chance to move on to names with less volatility. GM and Ford, who are now seen as playing EV. I think you will get a withdrawal and I think the withdrawal is affordable,” O’Hara said.
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