Monday, April 16, 2012

Buying Into Increasing Car Sales

This week I have a low-risk high-reward buy long stock pick on AutoNation. The stock market has just had its worst two weeks this year so far. Is it headed lower or is the sell-off over with for now? With earnings season here now maybe earnings reports will show more direction. I'm betting this week equities keep grinding higher with the Feds quantitative easing program, and potential positive earnings reports? In case the market goes against your positions use the best tool available to you called stop-loss to live trade and invest another day.

On April 05, 2012 Zacks Investment Research reported that AutoNation posted a 15% increase in new vehicle sales to 25,489 units in March 2012 compared with the same month in the previous year. The company recorded improvement in sales in all of its segments.

Sales in the Domestic segment hiked 26% to 7,991 vehicles; Imports increased 10% to 13,403 vehicles and the Premium Luxury segment rose 10% to 4,095 vehicles during the month.

Last month, light vehicle sales in the U.S. grew 10% to seasonally adjusted annual rate of 14.4 million units from 13.1 million units in the same month of 2011. The increase was driven by higher demand for fuel-efficient small cars and compacts due to rising gas prices. Mild weather and increasing age of vehicles on road stimulated sales during the month.

Large vehicles also performed well during the month. The improvement was driven by attractive promotions on trucks, along with expanding opportunities in the job market and higher consumer confidence.

AutoNation offers a range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products, and other aftermarket products.

The key brand of vehicles that the company offers for sale are manufactured by Ford Motor Co., Toyota Motor Corp., Nissan Motor Co., General Motors Company, Honda Motor Co., Daimler AG’s Mercedes-Benz, BMW, and Chrysler.

AutoNation holds a Zacks #2 Rank (Buy) on its shares. The company earned $71 million or 51 cents per share in fourth quarter of 2011 compared with $68 million or 45 cents per share in the same quarter last year. With this, the profit surpassed the Zacks Consensus Estimate by 3 cents per share.

Revenues in the quarter augmented by 13% to $3.7 billion from $3.2 billion in the same quarter last year. This growth was mainly fueled by strong sales volume in retail, new and used vehicles. Revenues were also higher than the Zacks Consensus Estimate of $3.5 billion.

Buy Long AutoNation - Ticker AN

Buy Entry: 32.25 to 33.23

Sell-Stop: 30.57

Take Profit Areas: 37.83 to 38.44, 39.01 to 39.69, 41.96 to 42.69, 47.89 to 48.76

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