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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Dan Meleney who wrote (18349)	1/3/2004 6:05:00 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78751

re: SAH. Issues with this company include: 1 Sleazy or illegal business practices (duh! Car dealerships.) 2. Product mix (wrongly reducing inventory of popular domestic trucks)and some lack of sales/managerial expertise in domestic dealerships (according to 10/28 Dow Jones report). Having the right product mix and being supported by a good used car/truck market is important. With so many new models and incentives, the used market was not that strong in '03 (That's my understanding: I'm no expert though.) 3. Automakers' incentives. Car retailers like SAH were beneficiaries of incentives - they encouraged customers to step up to more expensive cars they (the customers) otherwise couldn't/wouldn't buy. Also, where consumers took cash rebates instead of low financing rates offered by the manufacturers, that allowed an opportunity for the retailers like SAH to further profit by offering financing themselves for the deal. Incentives pushed product; it seems to me that the dealerships profited while the manufacturers seemingly did not. As you may know the domestic manufacturers (Incentives are much more prevalent with domestics vs. imports) are trying to wean customers off the expectation of "dealer incentives". To the extent they might be successful this time, that might reduce profits of SAH and others. What SAH has going for it compared to the manufacturers are 1)lack of large capital base and associated expenditures, and 2)a non-unionized workforce. These publicly-held dealerships are very diversified - geographically, by imports and domestics, and by market segment (mix of premium brands vs other). Also, it's my opinion that there might be some opportunities for consolidation in the business - mergers, or buyouts of smaller individually-owned dealerships. SAH hasn't done much lately. The stock's at $22.57. My last buy was 10/31 @ $21.25. As I once mentioned here, I have bought several of these publicly-held companies. They all have most of the same characteristics, and owning a package reduces the business risks that might be specific to one company. I have GPI, SAH, UAG. Rightly or wrongly, I passed on two - AN and LAD. The three I have seem to trade similarly: finance.yahoo.com Paul Senior