Did anyone happen to see AUTO ZONES earnings release this morning???
They BEAT…BIG TIME…The stock is right around $150 now.
I’m posting this for anyone interested in watching how automotive markets respond to a deep recession. All I ask is that you simply WATCH…When I say WATCH, I talking a few YEARS here…
Auto Zone was UP because… as in EVERY recession…People DO NOT buy new cars they REPAIR the cars they own. Auto sales peaked in this country in 2005 at just around 16 MILLION. That makes those cars 4 to 4 1/2 years old now. (05 models rolled out in the fall)
Autozones data shows that people continue to repair their cars until the reach about 7 years old. At that point most people decide a monthly payment is actually cheaper than continued repairs and they need a more reliable car.
So…That puts us in EXACT alignment with Nouriel Roubini’s 3 year recession theory.
Somewhere around 2012 US auto sales will hit another event that occurs in EVERY recession…
PENT UP DEMAND!!!
This is what caused Chrysler stock to rocket from $9/share in 1992 to $90/share in 1998.
It caused HONDA stock to go from $4/share to $40/share.
Ford’s stock to go from $1 to $36/share
This is LONG TERM…But it’s right in front of our eyes…EVERYTHING…The drop in new car sales, the increase in do it yourself auto parts sellers, the aging of the fleet…This ends only ONE WAY!!!
The question is…and it’s a HUGE question…Will Ford be able to down size itself and survive to outlast this recession???
Simply WATCHING this occur…good or bad…can teach you volumes about our economy, investing, and markets.
One other note…
You all know Ford is my pick here…BUT…The JAPANESE car companies are going to continue to get killed here too…Watch those stocks!!! They are NOT immune to the economic events. Those stocks will continue to fall as this recession deepens…At some point prior to 2012 the BARGAINS WILL BE EVERYWHERE!!!
Let’s look at Toyota…I’ll never forget JIM CRAMER in January of 2007 BEGGING his viewers to buy just 2 stocks for 2007…Jimmy’s picks???
TOYOTA at $135/share…Now $60
Goldman at $235/share…Now at $84
If Toyota continues to fall from $60 in 2009…What will it’s stock price look like in 2013 when compared to the current pathetic 9 million annual car sales. PENT UP DEMAND in 2013 could send this entire group substantially higher with a move up to just a more ordinary 12 milllion/year annual run rate??? It’s going to happen…Cars are not luxury items…People MUST have them inorder to WORK…Beautiful little play unfolding here…
Just keep an eye on it…That’s all I’m sayng.