The American automobile industry is moving along with pedal-to-the-metal speed. Automotive News, based on research by Kelley Blue Book, reports retail auto sales in the U.S. in 2015 should reach 13.9 million, up from 13.5 million in 2014. Transaction prices will average about $33,500, a nearly $700 increase from 2014's $32,804.
J.D. Power and Associates, as reported by CNBC, expects retail sales of new cars and trucks at U.S. auto dealerships to climb to 13.83 million in 2015, which would set a new record, besting 2004's 13.80 million, the current record holder.
Used-vehicle sales should also do relatively well. The National Automobile Dealers Association, though expecting used-vehicle prices to decline 2% to 2.5% in 2015, expects volume to increase a strong 8%.
When investors consider the auto industry, their focus is typically on the major automakers. But to buy a car requires the services of a dealer. Several auto dealers present a strong investment opportunity at this time.
CarMax (KMX) is a major used-car dealer known for its no-haggle pricing strategy. Buyers pay the listed price and the company's sales people earn the same commission, no matter which vehicle is bought or its price. CarMax operates more than 140 stores across the country.
AutoNation (AN) calls itself "the largest pure-play automotive retail company in America." It earns more than half its sales from new vehicles, and has a competitive advantage stemming from its economies of scale.
Asbury Automotive Group (ABG) has 77 retail stores that carry 29 automobile brands, making it the fifth-largest public automotive retailer in the country, says the company. About 85% of sales are from foreign brands, with a heavy emphasis on luxury autos, which helps it during economic downturns.
Consider adding any of these auto dealers to your portfolio. High performers all, they are well thought of by my James P. O'Shaughnessy strategy. O'Shaughnessy is a noted Wall Street strategist and fund manager who, in the 1990s, used extensive research to devise an investment strategy that has proven itself over time. I automated this strategy so I could use it as a tool to study virtually any publicly traded company. Today, investors should consider taking a ride with these three auto dealers because each of these companies earns very high grades from the strategy.
All three dealers satisfy every requirement of the strategy, including having sufficiently large market caps, earnings per share that have increased in each of the past five years and a price-to-sales ratio below 1.5, indicating the stock is well priced. Stocks that pass these three hurdles are then judged by their relative strength, a measure of how well a stock has performed vs. the market during the past year. Only the top 50 of all publicly traded stocks earn the O'Shaughnessy strategy's highest grade based on relative strength, and CarMax, AutoNation and Asbury are part of this elite group.
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