Car Makers
For investors in the auto making industry it is the best of times and the worst of times – to borrow a phrase from Charles Dickens. Auto companies are big and diversified, cars still corrode, people are vain and the need for humans to travel remains a driver of life. For these reasons, demand for cars remains strong. But, we all know oil will not last forever and for this reason some investors must be trying to pick the winners or losers in the auto sector. We will look at the titans – Volkswagen, Toyota, Honda, BMW, Renault, Peugeot and Daimler.
The French players see the highest short interest in terms of the percentage of their shares being lent to cover short sales. Peu‐ geot has just under 8% of the company on loan and Renault has almost 5%. Institutional owners who lend their shares are adding to their Peugeot holdings but are flat in Renault. Given their smaller reach compared to the more international German and Japanese car makers, it isn’t perhaps surprising to see more short selling here. However, this is a hard situation to read. It could be that the French auto companies have a strong pres‐ ence in more emerging parts of Europe even if they are not very present in the US and Asia.
Honda and Toyota are paying dividends right now and this explains most of the borrowing in these names.We can infer some positive sentiment towards Honda in the form of lending institutional investors who have increased their holdings in Honda. A year ago they held 190m shares and this is now 215m or 11% of the company. There are other members of the Nikkei 225 with greater than 11% of their shares held by such funds but Honda would be in the top quartile in this regard. Toyota has 8% of its shares in the lending programs that we track and this has been fairly flat.
BMW is interesting to the extent that the quantity on loan has increased by 6.6% over the week to 2.53% of total shares, but this is a large increase in value. There is no upcom‐ ing dividend that we can detect. Stock loan transactions are up on the week. The Mini is selling well and sold out till February accord‐ ing to a recent update ‐ and this is a BMW brand.
Volkswagen’s main share listing has scarcely any short selling but the Pref share has 2% of its shares on loan and 25% of its issued shares are held by funds who lend, whereas only 1.3% of the ordinary shares are in lend‐ ing programs. Fiat may be consumed by VW but for now it is independent and has very little short inter‐ est. Volvo has seen short interest increase from 4% to 4.5% of its shares.
It is hard to read the directional short selling in Ford due to its convertible bond issuance while GM (Motors Liquidation Co) has seen rising demand to borrow the few shares that are available.
So while the newspapers are alive with news on electric cars and green solutions, the existing car makers trundle forward and almost all of the names above have seen strong recent share price performance. It remains to be seen who will be the exact losers should non petrol consuming cars take a foothold.
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