Goldman Sachs' Patrick Archambault downgraded the Automobile sector to Neutral Tuesday morning, citing "rising rates and valuation."
The analyst added shares of General Motors GM to the firm's "Conviction Buy" list while at the same time removing shares of Ford F. Archambault downgraded Delphi DLPH and Tenneco TEN from Buy to Neutral and downgraded shares of Standard Motor Products SMP to Sell.
Archambault noted, "Auto equities have underperformed the S&P 500
by an average of 26% in 3 of the 4 last tightening
cycles. This has occurred even in the face of rising
demand as production comps have started to slow
and is one of the reasons the sector has historically
peaked 65% of the way through an expansion."
The Goldman analyst said the firm will "now focus on product driven names like GM
and Ford which can bring some secular growth to
the table." He said companies with "lagging end
markets like Tires and commercial vehicles" while begin to get more attractive in this environment.
Shares of GM last traded down 0.5 percent to $36.30, shares of Ford are down 2.5 percent, Delphi shares are down 1.4 percent, Tenneco shares are down 1.9 percent, and shares of Standard Motor, with the concerning Sell rating, are down more than 6 percent.
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