General Motors announced a production shutdown at several U.S. plants and Ford announced an additional downtime at two plants, the latest alterations in the car supply chain due to a shortage of chips.
Shares of GM fell 1% on Thursday, the day of its announcement. Ford closed nearly 2%.
Both stocks have increased by more than 40% during the year, despite continuing production problems.
JC O’Hara, market technician at MKM Partners, identified a way to expose himself to car stocks without the risk of headwinds.
“Used car sales go through the roof, so one of the games I’m very interested in here is CarMax. They’re a huge used car sales company and the positivity of used car sales is reflected in the chart,” he said. dir O’Hara. CNBC’s “Trading Nation” on Thursday.
CarMax has met more than 100% in the last 12 months. Shares have risen 36% this year alone.
Gina Sanchez, chief market strategist at Lido Advisors and CEO of Chantico Global, warned that chip shortages are “something that probably won’t go away.”
With Ford and GM switching to electric vehicles, Sanchez noted that “Ford’s prospects are significantly better than GM, based on the idea that they actually move in the electric car space, but what’s interesting is that the electric cars work to require more chips, not less “.
“Vendors didn’t store enough chips because demand for cars plummeted during Covid, so now they’re just stuck with the wrong foot and it’s not that easy to order more chips,” he said in the same interview. “This will probably take a few months to work on and reduce the recovery of the automotive sector.”
Still, for long-term investors, O’Hara said GM and Ford could present a more stable opportunity to more volatile electric vehicle manufacturers like Tesla.
“We have a chance to move to names of lower volatility. GM and Ford, which now look like EV is playing. I think you’re going to get a setback and I think it can be bought,” O’Hara said.
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