If you had to guess about the state of the auto industry by looking at nothing but stock charts for General Motors (GM) and Ford (F), you’d be pretty gloomy. GM’s stock is down 10% during the last 12 months and 18% during the last two years. Ford’s shares are down 10% and 12% during the same time windows. Those are recessionary numbers.

Yet carmakers posted record sales for 2015 and profitability has been strong. All told, automakers sold about 17.5 million cars in the United States in 2015, eclipsing the prior record of 17.4 million all the way back in 2000. GM and Ford, the main U.S. automakers, haven’t posted 2015 earnings yet, but both seem poised for double-digit gains compared with 2014.

So why the disconnect between strong sales and financial performance, and sagging stocks?

The answer might be as simple as investor neglect. “This is a sector that isn’t well loved,” says analyst David Whiston of Morningstar. “It’s capital-intensive, there’s union involvement and American cars don’t have the best reputation.”

Automaker stocks during the last five years. Ford is in blue, GM is in red, and the S&P 500 index is in green. More

Flashy technology stocks have clearly changed the way investors think about American stalwarts like the Detroit automakers, industrial firms and even old-line tech companies like IBM (IBM) and Hewlett-Packard (HPQ). Investors want growth stocks liable to post exciting annual returns, with the old buy-and-hold mentality now more likely to lead conservative investors to index funds rather than individual shares.

Big automakers seem like fading dinosaurs, in comparison with hot tickers like Netflix (NFLX), Amazon (AMZN), Facebook (FB) and Tesla (TSLA)."Wall Street thinks this is the best the business will get," Ford CEO Mark Fields recently told Yahoo Finance. "They have no faith the business can grow."

Until recently, China and other developing markets such as Brazil, Russia and India looked like huge growth markets for the big automakers, with GM in particular benefiting from a leading position in China. But the Chinese economy has drifted into the slow lane, while Brazil, Russia and some other developing markets are in reverse, dimming a once vivid opportunity for carmakers.

Then there’s the whole question of if, or when, cars will be replaced by robotic pods that materialize only when you need a ride somewhere. Constant headlines about self-driving cars and Silicon Valley breakthroughs that will make the monthly car payment obsolete portray 100-year old automakers as geriatric patients waiting around to die.



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But the automakers didn’t die in 2015 and they won’t die in 2016, either, since forecasts call for a slight improvement on last year’s record sales. Meanwhile, General Motors sold 3.1 million cars in 2015 and put most of the controversy and expense of the embarrassing ignition-key recalls begun in 2015 behind it. Ford sold 2.6 million vehicles, Italian-American hybrid firm Fiat Chrysler (FCAU) sold 2.2 million, and the Japanese giant Toyota (TM) sold 2.2 million. That’s a lot of cars. Beloved upstart Tesla, meanwhile, sold about 51,000 cars, or 1.6% as many as GM. Apple (AAPL) and Google (GOOGL), widely rumored to be on the verge of putting Detroit out of business, didn’t sell any cars.

If auto analysts are right, automaker shares are notably undervalued and will soon find love among investors hunting for bargains. "There's room for more profitable growth for these stocks," says Efraim Levy of S&P Capital IQ. "I'm betting investors will warm to these shares and they'll still do very well." Analysts surveyed by S&P Capital IQ rate both stocks outperform, on average, with 12-month price targets roughly 25% above current levels. It’s worth noting that both stocks pay a healthy 4% dividend. And future developments could quickly garner attention for these overlooked shares.

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