One of the sub sectors that got hammered the most after Brexit was the motor retailers. Although they are slightly up from their lows the shares are still up to 30/40% below where they traded before Brexit. The reasons are the continuing fears of a recession and the decline in sterling which makes importing new cars more expensive for retailers.
I think these fears are ill founded. Firstly, it appears the economy is doing fine. The online and high street retailers have generally reported strong trading and it has been noted that economic forecasters have had to admit they got their prognosis of the effects of Brexit hopelessly wrong. Secondly, sterling has recovered slightly from its lows and in any case motor retailers have managed to partially defray the cost of higher imports. Also, car retailers are more dependent on sales of second hand cars and after sales service which are both doing well.
There has been little news from the sector since Brexit but we will be hearing more over the next couple of months that should confirm robust trading. Cambria Autos had a trading statement on January 4th that reiterated that it would meet expectations. Marshall Motor issued a unscheduled trading statement in October stating it did not understand why its share price had declined so markedly and today issued a trading statement that was in line with expectations. It said that the new car was expected to decline but overall it was trading well.
Generally, these shares have been trading sideways for the last few months on minimal volume as the market is not prepared to buy into the idea that profits will not collapse. On the Stockopedia stock ranking system they have poor momentum as the share prices have been static in a rising market but the value rating is over 90% for most of them with PEs well into single digits and some good divdend yields available. If the sector does come back into vogue the shares are likely to move very quickly as the companies are mostly small cap illiquid shares.
One of the larger stocks that is traded more heavily is Pendragon, a FTSE 250 company. It has been buying back its own shares recently and there are signs the shares are poised to break. A chartist would be very excited by…
I have traded in and out of this sector since Brexit.
It remains interesting for all the reasons Paul has given, mainly recurring vehicle servicing income, freeholds and dividends.
Your macro call may be right but looks wrong to me.Sterling is hardly off its lows and there may be a crisis looming with a hard Brexit. Neither would I speculate on the economy being fine or the car dealers' announcements moving the share prices.
For this reason my only conviction hold is INCH Inchape because it has dealerships in Malaysia. The price performance is proving me right so far.
I have sold out of LOOK Lookers three times, twice at a profit but it has kept going. None now.
I have tried to buy more MMH Marshalls many times but was beaten back by the enormous spread. Until today it appeared the best bargain.
The cheapest on Price to Book grounds is CFYN Caffyns but I only want to pay around 5 pounds per share and it has only been that low once, shortly after Brexit. I missed it.
Some subscribers dislike CAMB Cambria because of the directors (pay and holdings) but I am happy to buy and sell. Bought 63, Sold 65, back in recently and slightly underwater.
VTU Vertu = Bought 37 Sold 49. Back in recently and slightly underwater. Surprisingly there appears to be more volume in VTU than in LOOK which has twice the market cap. Maybe that explains why there is less fluctuation and LOOK gives better trading opportunities despite the 1 pound price against VTU's 40p.
PDG Pendragon has Price to Tangible Book of 17,7 up from 14,3 when I first rejected it.
Hope that helps. It helps me put my thoughts together!
