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For value investors, buying auto stocks has brought more pain than good. However, there are plenty of opportunities in this field, to say the least.
Brian Sponheimer, portfolio manager at Gabelli Funds, told Yahoo Finance: “We are value investors, and automakers are statistically undervalued, but in terms of market share for electric vehicles, investors are “We face significant capital expenditures, declining profit margins and an uncertain outlook for results.” Mr. Sponheimer focuses on the automotive and industrial divisions of Gabelli, which is led by billionaire investor Mario Gabelli.
That doesn’t mean there’s no time to buy stocks in automakers like Ford, GM, or Stellantis. But the price is just too high right now, Sponheimer said.
“G.M. [trading] If the profit is 5 times or more [price to earnings ratio] “Six times earnings is expensive,” he said. “[If] The stock price is going to drop 20% and that might change just from a trading standpoint, but we’re really looking for a jumpstart in the stock price and we don’t see that at the moment for traditional automakers. It’s difficult. ”
Tesla is at the other end of the valuation spectrum. Trading at a P/E ratio of around 200 times, it’s not a stock that Gabelli’s portfolio managers would target, but it could be. For investors, Sponheimer says they need a sound theory and perhaps a bold belief.
“Tesla is certainly more interesting at this level than it’s ever been,” he said. “I think there are some very exciting things happening for the companies that will be leaders in electric vehicle development over the next 10 years, but I can’t say for certain that there will be a cost.”I have an AI story that I want to invest in. I love jumping in unless I really believe that. ”
Aside from traditional automakers and Tesla, Sponheimer and Gabelli prefer ancillary deals in the auto space. He said there are opportunities for sectors with more predictable resilience, such as car dealership owners, while companies like AutoNation (AN) are looking to increase vehicle sales to drive parts and service sales. said that they could benefit from increased complexity.
“AutoNation still sells new and used vehicles through traditional dealerships, but in order to really grow its parts and service business, drive free cash flow, expand the business and ultimately buy back. We’re really leveraging that dealer profit center, and we generate a significant amount of our own stock in the process,” Sponheimer said.
A closer look at small-cap value trades shows that slowing EV adoption represents an opportunity for gasoline fuel technology providers. New turbocharger technology is gaining ground in industrial markets and a variety of other end markets, and companies like Garrett Motion (GTX) are poised to thrive, Sponheimer said.
Sponheimer said Garrett, well-known among car enthusiasts for its bolt-on turbochargers, is a “cheap stock” given the current environment with “excellent cash flow.”
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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