Is Now The Time To Buy Ford, GM And These 4 Other Undervalued Stocks?


The consumer discretionary sector has lagged the S&P 500 throughout a volatile year of trading in 2021.

Year-to-date, the Consumer Discretionary Select Sector SPDR Fund XLY has a total return of 14.5% compared to a total return of 21.3% for the SPDR S&P 500 ETF Trust SPY.

Assuming the outbreak of the delta variant of COVID-19 subsides and the U.S. economic reopening stays on track, there could be some attractive value opportunities within the consumer discretionary sector to buy today.

PulteGroup, Inc. PHM
PulteGroup is one of the largest U.S. residential homebuilders. The company has benefitted from a boom in the U.S. housing market after emergency Federal Reserve interest rate cuts in March 2020.

The stock’s total return in 2021 is just 17.2% as experts expect rising mortgage rates will cool down the historically hot housing market. Its forward earnings multiple is just 5.7, the lowest in the entire S&P 500 consumer discretionary sector. Analysts have high hopes for PulteGroup in the next 12 months.

The average price target among the 11 analysts covering PulteGroup is $71, suggesting a 41.2% upside from current levels.

Related Link: Is Now The Time To Buy These 6 Undervalued Communication Services Stocks?

Ford Motor Company F
Ford is the second-largest legacy U.S. automaker.

Ford has been a major sector leader so far in 2021, generating a total return of 48% this year.

The stock has one of the lowest forward earnings multiples in the sector at just 6.7 and a price-to-earnings-to-growth (PEG) ratio of just 0.38. Looking ahead, analysts are expecting more momentum for Ford in the next 12 months.

The average price target among the 20 analysts covering the stock is $17, suggesting a 30.7% upside from current levels.

General Motors Company GM
General Motors is the largest legacy U.S. automaker and is Ford’s biggest rival.

Unlike Ford, GM has underperformed so far this year, generating just a 17.1% total return in 2021. However, the stock’s 7.0 forward earnings multiple suggests there is still plenty of potential valuation upside for investors.

Fortunately for GM investors, analysts covering the stock see more gains ahead for GM than Ford.

The average price target among the 21 analysts covering GM is $71, suggesting 45.6% upside from current levels.

D R Horton Inc DHI
D.R. Horton is one of the largest public homebuilders and is benefitting from the same housing boom that is helping PulteGroup’s business.

The stock has lagged more than doubled the return of the consumer discretionary sector as a whole in 2021, generating a 34.2% total return year-to-date. Value investors may like the stock’s forward earnings multiple of 7.1.

The 17 analysts covering the stock have an average price target of $110, suggesting 19.7% upside for D.R. Horton over the next 12 months.

Lennar Corporation LEN
Lennar is yet another top U.S. homebuilder that is trading at an extremely attractive valuation these days. Lennar has significantly outperformed its peers and the rest of the market.

After factoring in its 1% dividend, Lennar shares have generated a total return of negative 35.5% this year, more than doubling the return of the consumer discretionary sector as a whole. The stock’s forward earnings multiple of just 7.6 might make the stock an attractive buy for value investors.

The 13 analysts covering Lennar have an average price target of $112, suggesting 9.4% upside over the next 12 months.

BorgWarner Inc. BWA
BorgWarner supplies powertrain components to the auto industry. BorgWarner shares have slightly underperformed the sector as a whole, generating a 10% total return year-to-date. BorgWarner’s forward earnings multiple remains one of the lowest in the sector at just 8.4. It also has an attractive PEG ratio of 0.6 and a price-to-sales ratio of just 0.73.

The 16 analysts covering BorgWarner are expecting the stock to continue to grind higher in the next 12 months. The average price target is $55, suggesting 30.5% upside from current levels.

At least BorgWarner investors get paid a 1.6% dividend for their patience, the highest yield of all six stocks mentioned.

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