In a report published earlier today, Morgan Stanley analyst, Adam Jones said, "The very strong underlying North American results reported by both GM GM and Ford F last week reinforce our view that now is a great time to reduce exposure to US auto names as we hover at cyclical peaks."
Jones noted that with US SAAR reaching 17 million the US auto cycle has moved from a "need to buy" to an "I just want to buy" consumer mindset. Reading the noted you get the idea that Jones is trying to remind investors of the age old of "buy low, sell high".
Supporting his view, Jones provided a "few key thoughts" to consider about the sector including.
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- Over dependence on China - Jones noted that Jaguar Land Rover (JLR) cut prices in China, which is estimated to be 50 percent of JLR's profit, by as much as 10 percent due to an antitrust campaign. Moreover, he says this was followed by price cut announcements from Audi and that similar cuts from GM and Ford are likely.
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