Play Strong Auto Sales Without Buying Car Stocks

The strong auto sales for the month of February bodes well for Sirius XM Holdings Inc.

, Visteon Corp

and Tower International Inc

. Auto sales in the United States have been healthier this year, with consumer demand for new vehicles strengthening. Companies such as Sirius should benefit from this trend as they would be getting more orders for their receivers. Buckingham analyst James Ratcliffe reiterated his Buy rating on SIRI shares and $5.00 target, implying 39 percent upside, as February auto sales support his above guidance subscriber forecast. The analyst raised his first quarter auto sales estimate to 4.1 million from 4.0 million, while 2016 forecast remains unchanged at 17.6 million. Meanwhile, more car sales mean more revenue for auto parts makers such as Visteon and Tower International. FBR analyst Christopher Van Horn said while results at the suppliers are typically based on production levels, monthly sales can give confidence in current production expectations. Horn noted that Visteon and Towers International have significant business penetration on platforms that are seeing high consumer demand. For instance, VC and TOWR are leveraged to F-Series and Explorer. "ATPs for these vehicles performed meaningfully better than the industry average, implying stronger demand that could encourage robust production rates to continue (positive for TOWR) and also implying further increase in cockpit technology demand (positive for VC) going forward. We also point to solid growth from Lincoln (+20%) as a positive for VC, which has exposure to the brand," Horn said in a note to clients. Shares of SIRI gained 1 percent and TOWR 0.18 percent. However, VC shares fell 1.48 percent.