The Secret to Unlocking Huge Auto-Tech Stocks Profits
Companies / US Auto's Jan 28, 2014 - 01:26 PM GMTBy: Money_Morning
Michael A. Robinson writes: As a tech investor, I pay a lot of attention to the key trends reshaping our world and setting us up for massive gains.
I've also found that sometimes you can boil down great investment opportunities into a number. In this case its 11.4...the average age of a car on U.S. roads today.
Compared with the new connected car, that's like driving something out of the Flintstones.
See, the connected car is both web and Bluetooth enabled. It's also loaded with complex sensors, sophisticated software, and advanced semiconductors.
This embedded tech ecosystem is one of the big reasons why the industry sold some 15.6 million vehicles last year, in no small part because drivers want their smartphones and cars to stay connected to each other.
Here's the thing. As much as I believe in the connected car, there are many, diverse tech-related ways to cash in on the millions of new vehicles rolling off the assembly lines this year.
The secret to finding the best auto-tech plays is to understand foremost their positioning in this booming sector.
Some companies have arisen on the back of auto-technology, but lack the fundamentals to last...
Others have names as old as the industry itself, yet their technology outpaces much newer, and ostensibly higher-tech, companies...
And then there are some right in-between.
Today, I'll show you three very diverse companies...
Yet for their different niches, they fit our one criterion: Perfectly positioned in the auto-tech sector to deliver market-crushing results...
Driving the Web for Record Sales
From a high-tech standpoint, AutoNation Inc. (NYSE: AN) ranks as an intriguing hybrid play.
To be sure, it is heavily rooted in the physical world. After all, the company operates some 267 auto dealerships around the United States, making it the industry's largest new-car retailer.
But its savvy use of the Web presents the company to potential new clients as more of an Internet buying service than a standard auto dealer.
For instance, when I recently logged onto the company's website, it knew automatically that I am located in Oakland, Calif. Much like you'd find at an independent broker, AutoNation's website prompts you to search for a vehicle by type, make, and model.
The home page also tells visitors it provides "hassle-free" dealing and offers to appraise their vehicles and give them a guaranteed trade-in value.
In this regard, the first impression you get is that of a company using the web to make car shopping much easier, rather than promoting any existing dealer or nameplate.
Its sophisticated use of the web is one of the reasons why the company continues to register huge sales gains. Both last November and December, the company had the highest sales for each of those months since 2001.
For last year's third period, AutoNation reported its fourth consecutive record earnings per share from continuing operations, a 14% increase from the previous year to $0.75. Total sales also increased 14% in the quarter to $4.5 billion.
With a market cap of $5.9 billion, the stock trades at $48 a share with a forward PE of 14.5. It's priced at only .35 times sales and has a PEG ratio of just .65, well below the "fair price" ratio of 1.
The Sweet Sound of Profits
To say that I've followed the development of one of the nation's leading car audio firms for more than 30 years is no exaggeration.
Fact is, the first stereo I bought out of college was made by Harman Kardin. I loved that stereo so much it got me kicked out of a couple of apartments.
And as a long-time audio enthusiast, I've tracked the company through its many changes over the years. Expanding through a combination of organic growth and mergers, the company's nameplates also include JBL and Infinity, two highly respected global brands.
With all that momentum behind it, Harman now sells sophisticated audio components and systems to most of the world's major car makers, including BMW, GM, Subaru, Toyota, and Volvo.
More to the point, Harman International Industries Inc. (NYSE: HAR) has moved beyond its audio roots and now ranks as a bona fide tech powerhouse.
In fact, over the last several years, Harman has ramped up its offerings of high-tech auto infotainment systems that provide navigation, multi-media, and audio control from the dashboard.
These are not only an integral part of the connected car; they are becoming big business for Harman. In its Fiscal 2013, Harman received new infotainment awards totaling $1.8 billion, compared with $1.2 billion for car audio.
It's a powerful one-two punch. Harman says that some 25 million vehicles on the road today feature its audio-infotainment systems that also integrate GPS and navigation.
Actually, Harman gives investors exposure beyond the new-car boom. The company has expanded into accessories that support the mobile revolution and also ranks as a leader in the professional audio-video market.
With a market cap of $6 billion, the stock trades at roughly $89 a share with a forward PE of about 17, in line with the overall market. In its first fiscal quarter 2014 ended Sept. 30 sales rose 17% to nearly $1.2 billion as non-GAAP earnings per share climbed 21% to $0.95.
Tweaking Materials and Fuel Economy
This sure ain't your granddad's Ford Motor Co. (NYSE: F).
Indeed, the firm is making huge sales gains because it has embraced a wide range of tech systems.
Ford has unveiled a breakthrough hybrid car and made steady advances in safety. With its EcoBoost engines, the firm is ahead of the curve on fuel economy.
And it's even tweaking materials science to produce a novel truck...
Ford recently unveiled a new version of its popular pickup, the F-150. To boost fuel economy while maintaining power, Ford decided to make the body and load bed almost completely of aluminum, marking the first high-volume vehicle to do so.
That's just the beginning...
Earlier this week, the Detroit-area automaker announced a new partnership with MIT and Stanford to develop a fully autonomous car by 2025. That effort builds on Ford's status as a leader in tech integration.
Its SYNC in-dash infotainment system is among the most advanced of any mass-market auto firm. Internal research shows it factors in the decision for 70% of buyers who go with Ford over a competing brand.
And Ford's C-MAX Hybrid is no slouch. With its sleek design, the model has become the darling of mass-market electrics. Ford quadrupled its slice of the U.S. electric-vehicle market nationally in the past year to a 16% share.
All of which translates into great sales figures. For 2013, Ford sold 2.5 million vehicles in the U.S, a 14% increase from the year before. The company also reported a 14% sales increase in Europe, and a stunning 49% increase in China.
With a market cap of $64 billion, the stock trades at around $16.40 a share with a forward PE of just 11. The company has a 28% return on equity and a PEG ratio of .89, with anything below 1 considered a discount.
The one thing that makes all three of these stocks great investments in the auto boom is that the firms involved fully grasp that cars are today as much about high tech as they are transportation. And they understand perfectly how to position themselves.
And in the next few years, this trend will only accelerate, giving each of these three even more chances to rack up new sales and profits for investors...
Source : http://moneymorning.com/2014/01/28/secret-unlocking-huge-auto-tech-profits-today/
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