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Well it looks like we’re going to start off 2013 with a BANG! Today I sold LAD at 38.79. That’s a 15% gain over my purchase price of 33.65. That’s a 15% gain in less than 6 weeks. That’s an annualized gain of 139%. I laugh at the fiscal cliff. All I do is make money because I am $$$MR. MARKET$$$.
While I was busy making 15%, the S&P 500 only made 4%. I am 3x better than the market. I outgained the market by 3x with a stock that had a PE of 12. Who does that??? $$$MR. MARKET$$$ does that. I am HUGE! Bring me your finest meats and cheeses.
Did you buy any LAD? Did you make an annualized gain of 139%? You? YOU? YOU??!!! How many quatloops is that? That’s like going to PARX casino and winning $275 in 20 minutes playing blackjack. Can you do that? YOU? YOU??
So you want more picks in 2013? Sure I’ll give you picks, but you have to reply to this note and tell me how much you like my picks. You have to tell at least one friend about my website. If you do this, you’ll receive more of my picks. If you don’t, then I’ll be all quiet.
I am HUGE!!
$$$MR. MARKET$$$
================================================== =================================
11-23-2012, 03:57 PM
mrmarket
Join Date: Sep 2003
Posts: 4,257
LAD ==> The Orange Bowl Winner!
Today is Black Friday. What do people do on Black Friday? They go shopping. Now when I go shopping, I go to the Ivy Inn and watch football with the regulars. When others go shopping, they like to spend money that they don’t have. So far I am hearing the Black Friday numbers are pretty good. Did you know that automobile sales are a big contributor towards retail sales? In fact auto sales represent the largest retail sector in the US!
When you go to buy a car, where do you go? Most people go to car dealers like this guy:
But in reality, these dealerships are a thing of the past. Did you know, in the last five years, the total number of US dealerships has declined from 22,000 dealers to 18,000? That’s a 20% decline in the NUMBER of dealerships.
However, if automobile sales continue to increase with demographic growth, that means the number of cars sold per dealership will increase. If the number of cars sold per dealership increases and a dealership grows its number of stores, that means that any dealership that does this will make more money. On top of all this, there are abundant acquisition opportunities for these megadealers to grow.
Today I bought stock in Lithia Motors Inc. (LAD) at 33.65. I will sell it in four to six weeks at 38.75. Here’s why I like LAD:
Now when I think of LAD, I usually think of Ernie “The Cat” Ladd….
But this is a different LAD.
Walt DeBoer founded Lithia Motors in 1946 as a Chrysler-Plymouth-Dodge dealership in Ashland, Oregon. Following Walt’s death in 1968, Walt’s son Sid along with Dick Heimann, grew the business to include 5 stores and 19 franchises in Southern Oregon.
In December 1996, this collection of dealerships was transformed into Lithia Motors, Inc., a publicly traded company (NYSE stock symbol-LAD). They envisioned a company that would continuously grow, provide great customer service, and opportunities for employees.
Lithia is one of America’s largest automotive retailers featuring most domestic and import franchises. Their stores serve urban and rural populations throughout the Western and Midwest United States. They believe that local communities are their lifeblood.
What about the stock?
Look at this awesome chart. The stock is up 74% in the last 52 weeks yet its PE is only 11.4 significantly below the industry’s P/E of 19. That means that as long as its earnings continue to follow the existing trend, this stock will stay at a great value and will continue to be attractive to investors.
Now I know thinking about investing in automobile sales makes you shudder, but all we are really looking at is the distribution system. It’s a one trillion dollar business, and the dealers make money for each car that gets pushed through. They don’t have to worry about design, government safety standards or expensive unions and outrageous pay benefits. All a dealer has to do is receive the cars and sell them.
People still think that the network of car dealerships remains a patchwork quilt of mom-and-pop retailers, even though in many metropolitan areas this is far from the case anymore. Lithia sells 29 brands of new and all brands of used vehicles at 87 stores in 11 states. By rolling up all of these small shops, the amalgamated dealership has a competitive advantage through scale.
They are particular with the type of dealerships they buy up. They are focused on mid-sized, regional markets for domestic and imported vehicles and metropolitan markets for luxury vehicles. Their insulation from competition gives them pricing protection.
The scale advantage over their fragmented competitors means that LAD can use centralized admin functions and common measurement metrics. They can have best in class information systems and can standardize sales training and customer service processes.
Year-on-year auto demand has picked up, increasing same-store sales. In the meantime, we are in the upward portion of the automotive demand cycle. On October 24, Lithia posted a HUGE 47.5% rise in third-quarter earnings per share to 90 cents from 61 cents a year ago, surpassing the ANAL-ysts estimate by 16.9% and marking the 11th straight quarter with a positive surprise.
Total revenue grew 24.2% to $888.4 million driven by strong revenue growth in new vehicle retail 31.4%), used vehicle retail (24.7%) and finance & insurance (38.6%).
On a unit basis, they sold approximately 14,500 new vehicles, an increase of 3,400 units or 31%, well above the national average of 14%. Our domestic sales increased 19% compared to 5% nationally. Their import sales were up 51% compared to 25% nationally, and our luxury sales were up 38% compared to 3% nationally. What’s amazing is if you do the math, it works out to only 2 cars per store sold per day that generates all of these earnings. So no doubt there is room to grow!
Lithia has a current dividend yield of 1.15%, and has increased its dividends by 43% in the past year. The company has a current payout ratio of 11.5%.
Lithia Motors has opened its third Portland-area Mercedes-Benz dealership in Beaverton, just in time for the brand’s biggest sales month. Lithia has not publicly projected the bottom line impact of the new store, which was funded through existing cash flow rather than the newly expanded credit line it announced earlier this year. The fact that it is using cash flow for this investment means management is very confident about their cash outlook. They believe new safety norms, technological development, better fuel economy, improving consumer credit markets and an aging fleet of vehicles on the road will continue to drive sales through the remainder of 2012 and in 2013.
The company has a 1-year ROE of 18.6%, which is higher than its peer group average of 14.5%. It also has a PEG ratio of 0.78, which is less than 1 and indicates that the stock is reasonably valued given the long-term expected growth of 25.0%.
An important driver of the recovery in auto sales is the expansion of consumer credit, particularly for lower-tier customers. Consistent with the past few quarters, lenders have shown their commitment to increasing their portfolio of automotive loans and are loosening their lending criteria to accomplish this objective. Right now, percentage of their overall finance business, they have 11% of their deals that are going actually to the sub-prime segment. Normalized levels are near 20%, so there is a long way to go in that arena which can lead to 1,500 additional units in a quarter.
Plus, LAD is operating in a geographical sweet spot. In terms of new vehicle same-store sales, Nevada was their #1 state at 34.2%. Their #2 state was Oregon at 34%. Iowa was 30.2%. North Dakota was 28.9%. And lastly, Washington was 29%. So a lot of the West is recovering like they were expecting.
For 2013, LAD expects between $3.11 and $3.21 per share based on total revenues of $3.5 billion to $3.6 billion. The earnings and revenue guidance reflect estimated year-over-year growth of 8.0%-10.7% and 9.1%-9.4%, respectively. Even given the fact that they will of course beat these numbers, the company estimates alone are good enough to move this stock past my target price. The basis for these projections are:
New vehicle same store sales increasing 10.6%
New vehicle gross margin of 7.1% to 7.3%
Used vehicle same store sales increasing 7.7%
Used vehicle gross margin of 14.3% to 14.5%
Service body and parts same store sales increasing 4.8%
Service body and parts gross margin of 48.0% to 48.2%
Finance and insurance gross profit of $1,050 per unit
Here’s what their boss had to say:
"Our stores delivered solid results in the third quarter," said Bryan DeBoer, President and CEO. "We generated the highest quarterly EPS in our history while driving SG&A expense as a percentage of gross profit to an all-time low. We continue our focus on improving vehicle sales volumes, service revenues and customer satisfaction. Our team challenges each other every day to increase performance throughout the organization, and remains vigilant to identify areas of opportunity. New vehicle sales volumes in the United States continue to recover. New safety and technology features, improved fuel economy and improving consumer credit markets, coupled with an aging fleet of vehicles, are all tailwinds for increasing sales levels through the remainder of 2012 and in 2013. Our new leadership team and a revitalized group of store managers is poised to continue this growth."
I don’t care what kind of car you buy next, but if you’re going to buy one in the Lithia parking lot then that’s going to work for me!
I am HUGE!!!
$$$MR. MARKET$$$
__________________
=============================
I am HUGE! Bring me your finest meats and cheeses.
- $$$MR. MARKET$$$
While I was busy making 15%, the S&P 500 only made 4%. I am 3x better than the market. I outgained the market by 3x with a stock that had a PE of 12. Who does that??? $$$MR. MARKET$$$ does that. I am HUGE! Bring me your finest meats and cheeses.
Did you buy any LAD? Did you make an annualized gain of 139%? You? YOU? YOU??!!! How many quatloops is that? That’s like going to PARX casino and winning $275 in 20 minutes playing blackjack. Can you do that? YOU? YOU??
So you want more picks in 2013? Sure I’ll give you picks, but you have to reply to this note and tell me how much you like my picks. You have to tell at least one friend about my website. If you do this, you’ll receive more of my picks. If you don’t, then I’ll be all quiet.
I am HUGE!!
$$$MR. MARKET$$$
================================================== =================================
11-23-2012, 03:57 PM
mrmarket
Join Date: Sep 2003
Posts: 4,257
LAD ==> The Orange Bowl Winner!
Today is Black Friday. What do people do on Black Friday? They go shopping. Now when I go shopping, I go to the Ivy Inn and watch football with the regulars. When others go shopping, they like to spend money that they don’t have. So far I am hearing the Black Friday numbers are pretty good. Did you know that automobile sales are a big contributor towards retail sales? In fact auto sales represent the largest retail sector in the US!
When you go to buy a car, where do you go? Most people go to car dealers like this guy:
But in reality, these dealerships are a thing of the past. Did you know, in the last five years, the total number of US dealerships has declined from 22,000 dealers to 18,000? That’s a 20% decline in the NUMBER of dealerships.
However, if automobile sales continue to increase with demographic growth, that means the number of cars sold per dealership will increase. If the number of cars sold per dealership increases and a dealership grows its number of stores, that means that any dealership that does this will make more money. On top of all this, there are abundant acquisition opportunities for these megadealers to grow.
Today I bought stock in Lithia Motors Inc. (LAD) at 33.65. I will sell it in four to six weeks at 38.75. Here’s why I like LAD:
Now when I think of LAD, I usually think of Ernie “The Cat” Ladd….
But this is a different LAD.
Walt DeBoer founded Lithia Motors in 1946 as a Chrysler-Plymouth-Dodge dealership in Ashland, Oregon. Following Walt’s death in 1968, Walt’s son Sid along with Dick Heimann, grew the business to include 5 stores and 19 franchises in Southern Oregon.
In December 1996, this collection of dealerships was transformed into Lithia Motors, Inc., a publicly traded company (NYSE stock symbol-LAD). They envisioned a company that would continuously grow, provide great customer service, and opportunities for employees.
Lithia is one of America’s largest automotive retailers featuring most domestic and import franchises. Their stores serve urban and rural populations throughout the Western and Midwest United States. They believe that local communities are their lifeblood.
What about the stock?
Look at this awesome chart. The stock is up 74% in the last 52 weeks yet its PE is only 11.4 significantly below the industry’s P/E of 19. That means that as long as its earnings continue to follow the existing trend, this stock will stay at a great value and will continue to be attractive to investors.
Now I know thinking about investing in automobile sales makes you shudder, but all we are really looking at is the distribution system. It’s a one trillion dollar business, and the dealers make money for each car that gets pushed through. They don’t have to worry about design, government safety standards or expensive unions and outrageous pay benefits. All a dealer has to do is receive the cars and sell them.
People still think that the network of car dealerships remains a patchwork quilt of mom-and-pop retailers, even though in many metropolitan areas this is far from the case anymore. Lithia sells 29 brands of new and all brands of used vehicles at 87 stores in 11 states. By rolling up all of these small shops, the amalgamated dealership has a competitive advantage through scale.
They are particular with the type of dealerships they buy up. They are focused on mid-sized, regional markets for domestic and imported vehicles and metropolitan markets for luxury vehicles. Their insulation from competition gives them pricing protection.
The scale advantage over their fragmented competitors means that LAD can use centralized admin functions and common measurement metrics. They can have best in class information systems and can standardize sales training and customer service processes.
Year-on-year auto demand has picked up, increasing same-store sales. In the meantime, we are in the upward portion of the automotive demand cycle. On October 24, Lithia posted a HUGE 47.5% rise in third-quarter earnings per share to 90 cents from 61 cents a year ago, surpassing the ANAL-ysts estimate by 16.9% and marking the 11th straight quarter with a positive surprise.
Total revenue grew 24.2% to $888.4 million driven by strong revenue growth in new vehicle retail 31.4%), used vehicle retail (24.7%) and finance & insurance (38.6%).
On a unit basis, they sold approximately 14,500 new vehicles, an increase of 3,400 units or 31%, well above the national average of 14%. Our domestic sales increased 19% compared to 5% nationally. Their import sales were up 51% compared to 25% nationally, and our luxury sales were up 38% compared to 3% nationally. What’s amazing is if you do the math, it works out to only 2 cars per store sold per day that generates all of these earnings. So no doubt there is room to grow!
Lithia has a current dividend yield of 1.15%, and has increased its dividends by 43% in the past year. The company has a current payout ratio of 11.5%.
Lithia Motors has opened its third Portland-area Mercedes-Benz dealership in Beaverton, just in time for the brand’s biggest sales month. Lithia has not publicly projected the bottom line impact of the new store, which was funded through existing cash flow rather than the newly expanded credit line it announced earlier this year. The fact that it is using cash flow for this investment means management is very confident about their cash outlook. They believe new safety norms, technological development, better fuel economy, improving consumer credit markets and an aging fleet of vehicles on the road will continue to drive sales through the remainder of 2012 and in 2013.
The company has a 1-year ROE of 18.6%, which is higher than its peer group average of 14.5%. It also has a PEG ratio of 0.78, which is less than 1 and indicates that the stock is reasonably valued given the long-term expected growth of 25.0%.
An important driver of the recovery in auto sales is the expansion of consumer credit, particularly for lower-tier customers. Consistent with the past few quarters, lenders have shown their commitment to increasing their portfolio of automotive loans and are loosening their lending criteria to accomplish this objective. Right now, percentage of their overall finance business, they have 11% of their deals that are going actually to the sub-prime segment. Normalized levels are near 20%, so there is a long way to go in that arena which can lead to 1,500 additional units in a quarter.
Plus, LAD is operating in a geographical sweet spot. In terms of new vehicle same-store sales, Nevada was their #1 state at 34.2%. Their #2 state was Oregon at 34%. Iowa was 30.2%. North Dakota was 28.9%. And lastly, Washington was 29%. So a lot of the West is recovering like they were expecting.
For 2013, LAD expects between $3.11 and $3.21 per share based on total revenues of $3.5 billion to $3.6 billion. The earnings and revenue guidance reflect estimated year-over-year growth of 8.0%-10.7% and 9.1%-9.4%, respectively. Even given the fact that they will of course beat these numbers, the company estimates alone are good enough to move this stock past my target price. The basis for these projections are:
New vehicle same store sales increasing 10.6%
New vehicle gross margin of 7.1% to 7.3%
Used vehicle same store sales increasing 7.7%
Used vehicle gross margin of 14.3% to 14.5%
Service body and parts same store sales increasing 4.8%
Service body and parts gross margin of 48.0% to 48.2%
Finance and insurance gross profit of $1,050 per unit
Here’s what their boss had to say:
"Our stores delivered solid results in the third quarter," said Bryan DeBoer, President and CEO. "We generated the highest quarterly EPS in our history while driving SG&A expense as a percentage of gross profit to an all-time low. We continue our focus on improving vehicle sales volumes, service revenues and customer satisfaction. Our team challenges each other every day to increase performance throughout the organization, and remains vigilant to identify areas of opportunity. New vehicle sales volumes in the United States continue to recover. New safety and technology features, improved fuel economy and improving consumer credit markets, coupled with an aging fleet of vehicles, are all tailwinds for increasing sales levels through the remainder of 2012 and in 2013. Our new leadership team and a revitalized group of store managers is poised to continue this growth."
I don’t care what kind of car you buy next, but if you’re going to buy one in the Lithia parking lot then that’s going to work for me!
I am HUGE!!!
$$$MR. MARKET$$$
__________________
=============================
I am HUGE! Bring me your finest meats and cheeses.
- $$$MR. MARKET$$$
Congrats on another huge pick.
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