LAD. A reversion-to-mean opportunity with a company in a sector that seems to be viable. I'm not very much depending on 2010 estimates indicating overvalue.
Cars are going to be bought. Somebody's going to be selling new and used cars, and fixing and repairing them. As complexity of vehicles increases, dealers may increase their advantage over independents.
As new auto sales numbers improve from recent past annual lows, I'll bet LAD once again sells closer to its stated book value (p/bk now is .58, per Yahoo), and at a higher p/sales ratio than its current relatively low .10.
What's hurt these auto retailer stocks -- other than the complete fall-off of customers for new/used cars in the this economic recession, is, imo, the fear that the debt levels of the publicly-traded retailers could not be sustained or refinanced. That seems not to be true now. However, the debt levels ARE high -- last time I looked d/e ratios are maybe 2:1 for all the publicly traded auto retailer stocks. Rightly or wrongly, that just seems how they all operate. At least they don't have high capital expense or fixed high salaries as do the auto manufacturers.
I also like the auto retailers because they sell brands from diverse manufacturers, and their stores are regional (LAD) or national. My preference also is to buy a package of these stocks.
As I've mentioned before, I have three now --- LAD, GPI, and PAG. I also like other aspects of the automobile sector and hold stocks therein (not suggesting these are value buys now) -- subprime auto loan or or just plain loan companies, nat. fuel conversion companies, Chinese diesel company, truck manufactures. Currently I'm looking at lithium miners to see if any are attractive for me for what I perceive to be a surge in hybrid vehicles because of the new USA mileage requirements in 2016. (Lithium stock buys would almost assuredly be a speculative bet for me, not a value play.) |
