Editor’s Note: If you think being retired means being less active, think again. Since my wife retired a year ago, I see her a lot less than I did while she was working.

That’s because her job forced her to work from home 25 hours per week. Now, she is free to scour southeastern North Carolina in search of the next great home decorating item!

That’s fine with me. Roaming about in crowded stores is not my idea of a good time. Instead, I prefer scouring the stock market for bargains, one of which I believe I found this week.

Hit and Run, But no Accident

The automobile sector has been taking a beating ever since President Trump announced new import tariffs on automobiles and parts made overseas. According to a press release issued by the White House on March 26, “of the 16 million cars bought by Americans (in 2024), only 25% of the vehicle content can be categorized as Made in America.”

That is why most automakers, both domestic and foreign, have taken a big hit lately. Last year, GM was the top selling automaker in the world at 1.28 million vehicles sold. During the past week, General Motors (NYSE: GM) fell 10 percent as shown in the circled are in the chart below.

Second on that list is Toyota Motor (NYSE: TM) at 1.18 million units sold. It also lost nearly 10 percent of its value during the past week. Only Ford Motor (NYSE: F), third on the list at 1.04 million vehicles sold last year, has fared relatively well trimming its share price decline to just 3 percent after initially taking a dive.

Unintended Consequences

To be sure, the new auto import tariffs will have an impact on consumer behavior. Last year, the average price paid for a new automobile purchased in the United States was nearly $49,000. Adding another 10 – 20 percent to that price to offset the new import tariffs could be a dealbreaker for many consumers.

That is essentially why the Trump administration believes that this tariff will increase sales of domestically manufactured automobiles. In turn, that should motivate automakers to increase their manufacturing activities in the United States.

It may be a few years before we know if that theory holds up. There may be unintended consequences of this action, such as greater reliance on mass transit or car owners hanging on to their vehicles for a few more years rather than replacing them.

Irrational Behavior

When a sector is under pressure, investors tend to behave irrationally. For example, the 29 Wall Street analysts that follow GM have an average one-year price target for the stock of $61. That is roughly a third higher than it was trading for at the start of this week.

That doesn’t add up. Either the analysts are wrong or investors are overreacting to the auto import tariffs. If the analysts are correct, then there are a lot of bargains to be had in the automobile manufacturing sector right now.

That’s why I decided to take a flyer on Stellantis N.V. (NYSE: STLA). The company is domiciled in Netherlands and owns several American car brands including Chrysler, Dodge, and Ram along with numerous European automakers. The analysts that follow STLA have an average one-year price target of $15.60 for the stock, about 40 percent above its current share price.

Feeling Greedy

A 40 percent gain in a year is nice but I’m feeling greedy, so I decided to buy a call option instead of owning shares of stock. A call option increases in value when the price of the underlying security goes up.

In this case, I bought a call option that expires in January 2027 at the $10 strike price for $2.50. For the intrinsic value of this trade to exceed my total cost, STLA must rise above $12.50 within the next 21 months.

If the analysts are correct and STLA makes it to $15.60 by this time next year, my call option will have more than doubled in value. Even then, I’d still have another eight months to go until it expires in case it takes longer than that for the auto sector to recover.

Admittedly, I am more risk tolerant than most investors. In that regard I am an adherent of Warren Buffett’s admonition to “be fearful when others are greedy, and greedy when others are fearful.”

A year or two from now, I’ll know if I would have been better off shopping for furniture with my wife rather than looking for bargains in the stock market.