Analyst Todd Sullivan over at seekingalpha reckons it's a good time to invest in the auto sector. Operating under the principle that Americans need cars for their economic survival, Sullivan says motorists will still be in the market– just shopping at a different stores. Sullivan points to Warren Buffet's recently acquired 13.98m share stake in CarMax and Sears Holding's big investment in AutoNation and AutoZone as proof that there's gold in them thar' pre-owned autos and car parts. Sullivan also tempts investors with the fact that all of these companies are "hovering around 52-week lows." Meanwhile, Sullivan counsels investors to avoid Detroit's domestic manufacturers' shares like the proverbial plague. "It should be noted that this is NOT an endorsement of the US auto industry via Ford or GM as these are just terrible businesses due to legacy union costs," Sullivan opines. "They are stuck in a cost structure that dooms them. It is probably the only business the airlines can look at and say "at least we are not them."
Find Reviews by Make:
Read all comments
I’ve said it before, but here goes: Autozone stock is only gonna get higher from here on out.
I hope some more folks give their opinion on these stocks……coming from the retail auto business I can’t say I would feel comfortable investing with the Auto Nations etc. I haven’t followed the stocks so I really have no clue as to their progress. I guess not trusting the accounting in my own field should tell me not to invest in Wall St. at all!
Will that many more people be working on their own cars even if they keep them longer? Or will they just have them repaired at their local dealership?
I’ve been numbed by triple-digit “GM Death Watch” entries, but Sullivan’s advice is like a bucket of ice water to the groin. We are so screwed.
uh, guys, not that there’s anything wrong with blogging :), and while what Todd writes may be spot on, I don’t think see any evidence that that Todd Sullivan is a professional investment “analyst.”
If your pension plan depended on GM stock, would you be worried? You don’t need to be a stock analyst to answer that.
Autozone stock ticker (Google)
Click on 10y – looks pretty good.
Does this mean more auto owners are working on their own cars?
Here in the North-East US, I’ve seen towns where mechanics make a good living changing wipers and light bulbs because the residents of that area can’t or won’t perform the service themselves.
Now I am to believe these very same people are going to replace a water-pump, timing belt, or alternator – even as cars become more complex and difficult to service?
I HIGHLY doubt it.
-ted
zerofoo: I’m sure the same was said before Home Depot offered free “how-to” clinics along with those great products.
After everyone gets over the shock of my wrench-talk, many take a more active role in their own rides. Its just a matter of time before the Home Depot model gains traction with more vehicle owners.
zerofoo may have point here. Cars are getting harder and harder to repair. But the numbers don’t lie: car sales are going down. That alone is reason enough to invest in parts and repair chains rather than OEM’s.
Certain aspects are getting harder, certain aspects are the same.
A timing belt is the same now as it was 20 years ago. A wheel bearing is about the same as it was before. Brakes are about the same as before.
Mufflers, wipers, lights, fluids, axles, steering parts, a/c, transmissions and so on are the same now as they were in the 1980s.
Yes, there are things that are more difficult like the ABS mastercylinder, airbags now, seat belts (pretensioners), etc etc etc.
I have done my own vehicle maintenance since I was 14 and started doing oil changes when I was about 8 years old (Dad had to initally loosen the drain plug and check the tightness after I was done).
I think it is a great investment. As the economy slows and the price of everything goes up people may drive less and keep their vehicles longer. While there are certain people who will never maintain their own cars, there maybe a whole new group of people forced to return to maintaining and repairing their own vehicles to save money. I have saved a huge amount of money doing this over the years. I had to because the mechanics made more money than I did. I’d have to work 2-3 hours just to pay his 1 hour of labor.
Buy a decent set of tools, buy a GOOD factory approved repair manual (Bentley, Helms, etc) and get started…
I still find it hard to buy a used car nowadays. I can get a(nother) nice, brand-new Toyota or Scion for the same price as a decently used car, minus a warranty.
Enthusiast cars aside (I’d pay a body part for a low-mileage ’95 Z32 TT), used cars just aren’t worth it to me. For those with big families, saving 15K+ on a midsize luxury sedan or minivan, I can see. But for the vast majority who travel with an upwards of a single passenger, we can buy a nice Yaris for 15K, or an xD for 16. Spend 1K more and you get a roomy xB, Matrix, etc. etc.
Of course, this is assuming that your daily ride is 22 years old (nothing like having a car as old as myself) and you need a reliable, economic ride to and from work. I guess a lot of people just instinctively trade in their cars after a year or two, or before the warranty runs dry. That’s the only explination I see as to why there are 5 driveable cars per American citizen.
(Seriously, I think the actual count was 2 or 3, but that’s still too many, considering that our population includes everyone from birth – how many kids need 2 cars each??)
Here in the North-East US, I’ve seen towns where mechanics make a good living changing wipers and light bulbs because the residents of that area can’t or won’t perform the service themselves.
What is it with people not being able to or wanting to change their light bulbs and other simple items. Are they that lazy that they dont change the burned out bulb in a lamp or clock battery that they just go out and buy a new one. Yes they are that easy to change. I should start charging people $10 a pop to change these idiot proof items.
Parts place stock looks like a smart idea with the coming/already here recession. Does anyone know if the places you could rent a garage and lift for a few hours or a day still exist for us apartment dwellers.
From crc: “Will that many more people be working on their own cars even if they keep them longer?”
My impression is that a big factor in growth of DIY auto auto repair and maintenance (and dressing-up) is the burgeoning latino population. Seems to me that stores like Autozone were among the earliest to provide signage in Spanish. Partly it’s a matter of necessity and habit for lower-income folks, but its also a car culture thing: the tradition of building rods & customs thrives among young Latino men.
Redbarchetta :
I’m not sure if places like that exist anymore for insurance reasons. When I was in the USAF we had the auto hobby shop on base which provided exactly what you’re asking about. They also had equipment for welding, mounting/balancing tires and a full crib of tools you could use.
I spent a lot of hours in that place putting a 5.0 V8 out of a wrecked cop Mustang into my ’79 4cyl Mustang.
I have resorted to a “professional” mechanic only once in the last decade. Most repairs are done in my driveway with basic hand tools. My cars dont break down either. 1 tow in the last decade.
BuckD :
March 18th, 2008 at 1:50 pm
I’ve been numbed by triple-digit “GM Death Watch” entries, but Sullivan’s advice is like a bucket of ice water to the groin. We are so screwed.
And so are the domestic 2.8 as long as they are being managed ( or should i say mis-managed???) the way they are now!!!!!!!! Ford is being “sorta” run by a man from the aviation industry (who takes his orders from the Ford family and board of directors – who are both mis-management stories in and of themselves…..just look at Ford’s financial loses month after month after month for proof!!!!!), GM has car guys in control but they seem to have their heads either in the sand or up their ass (or my guess: BOTH !!!) and Chrysler is being run by bankers and financial advisers. I say the only hope for the 2.8 is to get someone in the CEO’s office of each company that knows how to run an automobile business in the 21st. century instead of being run like they were in the first 60 years of the last century when they had no worries from the Japanese, Korean and European comptition.
The Navy had Auto Hobby Shops as late as 1996 when I returned to the civilian world. Anybody got a date more recent than that?
Answered my own question:
http://www.nasjax.navy.mil/mwr/mwrnasjax/mwrauto.htm
One example.
Google Images has alot of pics of various auto hobby shops.
I’m a long time DIY person and the auto parts stores I go in seem to have a strong business. Here in Nor. Cal. much of the customer base is indeed Spanish speaking.
There is a large segment of society which does it’s own car work out of economic necessity if nothing else. These aren’t the people living in gated communities and shopping at Nordstroms, but they are the people who make up the working backbone of the world.
Some years ago I was at a dinner with other executives from my then employer. The CFO lived in the same neighborhood as I did and commented that he thought he saw me changing the oil on my company provided Cadillac STS that past weekend. I confirmed that he did indeed see me doing just that and he was befuddled. “You know, you can pay people to do that sort of thing.” I told him that I had been changing oil myself since I was 13 years old and wasn’t about to stop because I enjoyed it, and that it took me less time to do myself then it would to drive to the dealer and wait around for them to do the job. Not long after that I pulled the ejection cord on that job. I’m much happier putzing around with my car then I ever was jetting off to meetings here there and everywhere.
Most routine maintenance work on modern cars really isn’t any harder than for the old stuff. Thanks to our fleet and the friends I help out I frequently work on cars ranging from the 1940s up through modern stuff. Recently I tackled CV joint boot replacements on a 2001 Volvo S70 and the job was really no more difficult than is changing out the master cylinder on a 1948 Plymouth.
However, electrical issues on modern stuff can be very hard to sort out!