January is a great month for many reasons. Stocks usually go up, every weekend is full of NFL playoff games, Las Vegas is the scene of the Consumer Electronics Show, and – most importantly — Detroit hosts the North American International Auto Show. 

I love cars, especially those of the fast and expensive persuasion. Before I hit pay dirt as a trader, my only chance to sit in the driver’s seat of a Porsche 911, Dodge Viper, or a Mercedes-Benz SLK convertible was as the attendee of an auto show. Even more expensive cars like Bentleys, Ferraris, Aston Martins, and Lamborghinis are also on display, but their doors are always locked and they are constantly surrounded by stern-looking car shiners who frown at even the smallest smudge your oily fingerprints may leave on a car hood, so you must be satisfied by adoring them from afar. And don’t forget the concept cars that look super-cool but aren’t practical enough to make it onto a mass production line. Case in point: the Jaguar C-X75. The “C” stands for concept but I think it should have a “W” for Wow!

Chicago’s auto show is the largest (as measured by attendance) and the one I have experienced the most times, but the Detroit auto show is the best. It’s first on the calendar and gets the most press attention, which ensures that it will receive the most complete selection of new cars available. Car manufacturers may decide to skip one of the subsequent auto shows around the U.S., but they always bring their best stuff to Detroit. In fact, foreign car manufacturers often only present at the Detroit auto show, which is why the show’s real name is the International Auto Show.

New Car Models Look Great

Based on the new models showcased, the future of the global auto industry appears bright. General Motors is coming out with the Cadillac ATS, which is supposed to be a BMW killer. Ford has redesigned the Ford Fusion, which is supposed to be a Toyota Camry and Honda Accord killer. Lastly, Chrysler (58.5%-owned by Fiat) is introducing the “groundbreaking” Dodge Dart, a fuel-efficient (40 mpg) compact car with European sportiness that sells for as little as $15,995.

The Big 3 automakers’ new cars are all impressive, and they’ll need to be since two foreign car manufacturers won the industry top two awards recently. In November, the Volkswagen Passat was named MotorTrends Car of the Year and at the Detroit Auto Show the Hyundai Elantra won North American Car of the Year (beating out the second-place VW Passat).

Which Auto Stock to Invest in?

The big question is which auto stock will do best in 2012. Each of the three global car regions (U.S., Western Europe, Asia) has strong prospects, but for different reasons. The Big 3 U.S. auto manufacturers have momentum, having increased their share of the U.S. market in 2011 for the first time in 23 years. Granted, their 47 percent collective market share remains a lot less than the 90 percent share in 1965 or even the 70 percent share in 1997, but they’ve stopped the deterioration and are now climbing. Growth should continue in 2012

The Japanese auto companies hit rock bottom in 2011 after being hit with two huge natural disasters: (1) northern Japan’s earthquake and subsequent tsunami in March; and (2) Thailand’s worst flooding in half a century in September and October. Japanese manufacturers have zero momentum but they can’t go anywhere but up in 2012, which should provide investors with some reassurance. However, a high Yen currency will make the recovery slow and difficult. Both Toyota and Honda are suffering from recalls and Honda added to its problems by screwing up its Honda Civic franchise with a cheapo remodel that got thumbs down from Consumer Reports magazine. No thanks.

South Korea’s Hyundai is doing well, but the stock isn’t listed in the U.S. so you’d need to trade it on the London exchange. Combine that with the political instability caused by the death of North Korea’s Kim Jon Il, and it’s just too hard to invest in Hyundai. India’s Tata – which owns the Jaguar and Land Rover brands — is benefitting from the continued strong growth in emerging markets, but it is losing market share to cheap local upstarts and the stock is not cheap.

The European car manufacturers in Germany and Italy generated strong profits in 2011 and offer high-quality vehicles that U.S. consumers want, but their U.S. exposure is a sideshow and their profit momentum in Europe has been stopped by the European debt crisis and impending recession. The good news is that valuations are low. The bad news is that things could get much worse in Europe before they get better. I’m keeping my eye on Volkswagen and Fiat, however, and will jump to buy when I’m confident that the debt crisis is over. Both have P/E ratios around 3.3 and estimated five-year annualized growth rates near 50%! That combination makes their PEG ratios some of the best I have ever seen.

The Winner is . . .

Ford Motor (NYSE: F) looks most attractive to me because it is reasonably priced and is located in the “safe haven” United States where momentum can be sustained. Ford’s estimated five-year growth rate isn’t spectacular, but safety and stability are my primary criteria right now. In contrast, General Motors is still partially owned by the U.S. government so there is the risk of inevitable selling pressure once the government decides to lower its stake. Chrysler is a private company that is majority owned by Italy’s Fiat. Last time I checked, Italy was not doing too well. That leaves Ford as the last U.S. company standing.