It’s been a rollercoaster start to the holiday shopping season. What started as a muted Black Friday transitioned into one of the best Cyber Monday’s of all time as consumers eschewed early morning in-person purchases for mobile shopping.

Looking at results from the combined weekend, the National Retail Federation expects U.S. Holiday shopping to increase by 3.7%. Underperforming retailers like Sears and Kmart from Sears Holding Corp (SHLD) are going to have a tough time explaining poor results when competitors booked huge returns.

[ad#Google Adsense 336×280-IA]On Cyber Monday Target Corporation (TGT) had their website crash with the surge in online traffic – ahem, I mean they “metered traffic” as their spokespeople said.

Target’s online traffic was twice as high as its busiest day ever. That’s pretty remarkable.

Wal-Mart Stores, Inc (WMT) also saw some outages – albeit less covered in the media – to its website as well.

An impressive half of its orders were reported to have come from mobile devices.

All in all, consumers bought more than $23.5 billion in goods over the holiday weekend.

Now that Christmas has been “saved” for many retailers, their stocks have crept up. TGT is up almost 6% and WMT is up about 4.5% from lows reached in November.

Headline-driven investors might believe these stocks are buys, but retail still has a lot of uncertainty and significant competition from e-commerce upstarts. I prefer to have a higher margin of safety when I’m buying, especially with fickle retailers.

So where should us second-level investors turn?

We should focus on companies that have been taking advantage of the positive retail environment and the Black Friday weekend, but haven’t caught the attention of Wall Street. I’m looking squarely at domestic automakers General Motors Company (GM) and Ford Motor Company (F).

These two have been the Rodney Dangerfields of the market as they’ve gotten “no respect I tell you“. Their stock prices have been unmoved over the past three weeks – and for most of the year for that matter.

Clouded in the turmoil from Volkswagen AG ADR (VLKAY), domestic automakers have been ignored in the midst of a blockbuster year. The fact is that auto industry is closing in on its 2000 all-time sales record of 17.35 million vehicles sold.

Black Friday promotions have helped November book a record 1.3 million vehicles sold – 1.6% higher than last year. Traditionally, November is a slow sales month. Despite this, GM increased sales by 1.5%. Ford added just 0.3% onto last year’s sales, but increased its F-series sold by 16%.

Stronger December sales could mean 2015 is a year for the record books.

In October, I looked at how both U.S. and Chinese consumer auto demand would keep the industry humming and provide it with the liquidity to increase dividends and buybacks. Little has changed to-date. The combined effects of low finance costs and inexpensive gasoline have buoyed sales all year.

But you wouldn’t know it based on the stock prices. Ford is down 9.5% in the last twelve months – a thankless reward for its 51% earnings per share (EPS) growth over the same time period:

General Motors has climbed 8.4% in the last year. Its stock is also seriously lagging its own EPS growth of 88% over the same time period.

EPS growth drives stock prices over the long haul, so we should expect these share prices to catch up to earnings. And here’s a really interesting profit tidbit…

Last month nearly 59% of all volume was from light trucks. A little known fact is that the auto industry makes more money when they sell larger and heavier vehicles over smaller cars. And in November Detroit’s automakers sold three trucks to every car.

That’s almost the highest ratio of SUVs and pickups in history.

It means Detroit automakers are earning more from each of their transactions. Ford has increased its average transaction cost to $36,000. That’s up 11% over last year. General Motors is reporting about the same – both are nearly $4,000 above the average of all automakers.

These sales are resulting in record operating profits and tremendous earnings growth. Meanwhile General Motors trades at a mere 6.7 times forward earnings while Ford trades at 7.6 – very cheap when you consider that the S&P 500 average is 17.6.

If we apply today’s bargain price-to-earnings (P/E) ratios to next year’s earnings estimates, we could see F trading at $23.38 per share and GM trading at $71.71. That’s a massive 61% increase for Ford and a near 100% one-year return for General Motors, with no increase in their cheap P/E multiples.

And both stocks will pay us about 4% in dividends annually to wait for this double-digit appreciation. And the prospect of dividend increases for 2016 is more exciting. Both automakers raised their payouts by double-digits in 2015, and I expect similar increases next year.

Despite negative coverage of the auto group by market pundits, Detroit and U.S. manufacturers are having a blockbuster year. The exceptional sales strength from the holiday weekend and YTD indicates that GM and Ford should continue to outperform the S&P 500 – in stock performance and dividend payouts – for the foreseeable future.

As much as I like the “stealth bull market” in automobiles, there’s one unstoppable trend that I like even more. It’s backed by one of the biggest demographic shifts in history – the 77 million Baby Boomers who just started retiring.

While automobile sales are ultimately cyclical, this industry is in a multi-decade bull market that’s just getting started in earnest. In fact, its addressable market is guaranteed to triple over the next 30 years.

— Brett Owens

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Source: Contrarian Outlook