General Motors announced a halt to production at several North American plants and Ford announced an additional shutdown at two plants, which were the latest interruptions in the car supply chain due to a shortage of chips.
Shares for GM fell 1% on Thursday, the day of its announcement. Ford closed almost 2%.
Both shares rose more than 40% for the year, despite continued production issues.
JC O’Hara, chief market technician at MKM Partners, has identified one way to gain exposure to the automotive stocks without the headwind risk.
“The sale of used cars is through the roof, so one play in which I am very interested is CarMax. It is a big sale of used cars, and the positivity of the sale of used cars is reflected in the graph,” said O Hara said. CNBC’s “Trading Nation” on Thursday.
CarMax has risen more than 100% over the past 12 months. Shares rose 36% this year alone.
Gina Sanchez, chief marketing officer of 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 switching to electric vehicles, Sanchez remarked: ‘The prospects for Ford are significantly better than GM’s, based on the idea that they’re really moving into electric car space, but what’s interesting is that electric cars are about more need chips, no less. ‘
“Suppliers just did not store enough chips because car demand dropped during Covid, and now they are just caught on the wrong foot, and it’s not that easy to just order more chips,” she said in the same interview. “It’s probably going to take a few months to work through, and that’s going to dampen the recovery for the automotive sector.”
For long-term investors, however, O’Hara said GM and Ford could offer a more stable opportunity than more volatile electric vehicle manufacturers like Tesla.
“We have a chance to move to low volatility names. GM and Ford, who are now seen as EV players. I think you will get a setback and I think you can buy a refund,” O’Hara said. .
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