The automotive space has been through a tough few years; between the supply - demand bullwhips, interest rates, regulations, etc. - I'm not sure anyone knows what the appropriate playbook is.
Only Toyota and Stellantis, historically speaking, ever make it through all of my subjective biases <ahem> screens.. As I wanted to quickly flip through my 'Evergreen' list in relatively short order - why not start with these two OEMs, which could almost be considered holding companies (if you were to dig in).
The setup for Toyota seems relatively straight forward:
valuation is sort of neutral
expectations at the median are for 12% REV growth 2024-2026
the crux is a balance between utilization rates and capex needed
if the former is high enough cash is generated to comfortably handle the latter
opposed by various, potentially brand tarnishing, scandals within the company
outside the company there are major forces at work impacting the demand side
while there are also forces reshaping the supply side
e.g., Nissan plus Honda, i.e., industry rationalization is usually quite positive
Things are a touch more complicated at Stellantis:
valuation is compelling versus peers
expectations at the median are for -10% REV growth 2024-2026
but that is set against aggressive capex plans (well underway)
and a management shakeup
the PSA folks are slowly being forced out and that side was better managed
they're more beholden to the EU and USA than Toyota
though in today's world the same forces impact them all
Neither currently seems focused on profitability and shareholder returns/ value - which can be fine but needs watching closely. With things running hot (not sure anyone would debate that) set against a protracted industrial recession; the risk/ reward doesn't seem so favorable here. IF I had to own eighty stocks, they'd be on the list - alas I don't.
Pass for now.
br. -john
p.s. i do realize that there was a 90% chance coming into this that i'd punt ... so there's that. :)
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