Autos O/W falls to net +4%; sector slips to 6th position
The October BofAML Fund Manager Survey (FMS) shows a 3% decline in the percentage
of investors overweight (O/W) Autos over the past month. Net +4% of investors said
they are O/W Autos in October vs. net +7% O/W Autos in September. Autos slipped to
the joint 6th most O/E sector after being the joint 5th most O/W in Sept and Aug and
holding the top position in four months earlier this year. While the sector remains in
favour, we continue to see risks to China related exposure and have a more cautious
view of the German OEMs (especially VW), with a preference for the French OEMs.
Although ownership is now within 1 standard deviation of the historic average level,
Autos remains one of the more favoured EU sectors according to the FMS. The SXAP
(+3.5% YTD) has now underperformed the SXXP (+5.6%) YTD. The SXAP has also
underperformed by -2.2% since the September survey four weeks ago.
Sector remains viewed as undervalued in October
Perception of value within EU Autos improved again considerably from last month. A net
36% of respondents see the sector as undervalued vs. a net 21% of respondents seeing
it as undervalued in the September survey. This change seems to be led by the sector’s
recent underperformance which has seen the sector's 1-year forward P/E fall from
12.3x, or 76% relative to the broader EU market, in March to 9.2x, or 63% relative,
today. This is now below the 70% long term average but we continue to favour a
selective approach to EU Autos investment given China risks.