We recently compiled a list of the 10 Best Car Stocks To Invest In Now. In this article, we are going to take a look at where Lithia Motors, Inc. (NYSE:LAD) stands against the other car stocks.
The automotive industry has witnessed a constant churn of innovation over the last several decades, with car makers continuously providing drivers with new features. However, there has been a different pace of change lately, with the rapid adoption of electric vehicles (EVs) being the most talked-of topic in the industry.
READ ALSO: 10 Best Used Car Stocks To Buy According to Hedge Funds and 10 Best Self Driving Car Stocks To Buy Now.
A lot of the conversations in the automotive space currently revolve around robotaxis, the autonomous taxis for ride-hailing, especially after Elon Musk unveiled the Cybercab in October this year. His company is showcasing the self-driving two-seater at several key locations across the United States in December, with plans to deploy the autonomous services in California and Texas in 2025.
According to a report in Euro News, global EV sales surged in November, with a record-breaking 1.8 million units sold worldwide, overtaking the record set in the prior month by 100,000 units. China accounted for two-thirds of the sales during the month. Around 15.2 million EVs were sold between January and November, growing 25% year-to-date.
The report stated a 3% decline in EV sales in the region comprising the United Kingdom (UK), the European Free Trade Association (EFTA) and the European Union (EU). With 280,000 units sold in November, annual sales for the region reached 2.7 million units. However, the UK is having an improvement in the second half of the year; sales have grown 17% from last year, driven by the Zero Emission Vehicle (ZEV) Mandate.
China is not only leading the EV market but is also on track to take over the global auto industry because of its massive and growing capacity. Earlier this month, the Council on Foreign Relations (CFR) highlighted that the country’s EV capacity will soon match its domestic auto demand, whereas China’s car production capacity is already half of the global demand for automobiles.
It is projected to have a total output of 20 million electric vehicles in 2024, with production increasing between 4-5 million units annually, helped by heavy investments from Chinese firms to expand production. According to the New York Times, China also has the capacity to produce over 40 million internal combustion engine cars a year.
India’s auto market is also seeing impressive growth, contributing significantly to the global market. Annual production of automobiles in the country stood at 25.9 million units in fiscal 2023. The thriving vehicle market has also resulted in a booming auto components industry, which has grown 11.3% during the first half of FY25, driven by strong demand for larger and more powerful cars.
Methodology
We sifted through screeners to identify stocks in the auto manufacturers, auto parts, and auto dealerships industries. From there, we selected the 10 stocks with the highest number of hedge fund investors, based on Insider Monkey’s database of over 900 prominent hedge funds as of Q3 2024. The 10 best car stocks to invest in now have been ranked in ascending order based on the number of hedge funds holding stakes in them. Where two or more stocks were tied on hedge fund sentiment, we used a higher market cap as a tiebreaker between them.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer in a store, examining a new vehicle on the showroom floor.
Lithia Motors, Inc. (NYSE:LAD)
Number of Hedge Fund Holders: 43
Lithia Motors, Inc. (NYSE:LAD) is an American automotive dealership that provides a range of products and services throughout the life of a vehicle. It operates through two segments: Vehicle Operations and Financing Operations. The company has a presence in 473 locations, representing 52 brands across the US, UK, and Canada.
On October 23, LAD announced financial results for the third quarter of fiscal 2023. Revenue for the quarter was posted at $9.2 billion, up 11% year-over-year. This was the highest third-quarter revenue in the company’s history. Diluted earnings per share were logged at $8.21.
Lithia Motors, Inc. (NYSE:LAD) also achieved $200 million in annualized cost savings, driven primarily by personnel-related reductions. The company stated that it sees further opportunities ahead to improve its cost structure and will be looking to eliminate an additional $100 million in costs in 2025.
In 2024, LAD welcomed several new acquisitions that have contributed nearly $6 billion in year-to-date revenue. During the quarter, the company acquired three stores from Duval Motor Company in Jacksonville and Gainesville, marking its expansion into new Florida markets. Collectively, these acquisitions are expected to generate $200 million in annualized revenue for Lithia Motors, Inc. (NYSE:LAD).
Investor sentiment around the stock continues to improve. According to Insider Monkey’s database for Q3 2024, 43 hedge funds held investments in the company, up from 35 at the end of the second quarter. Appalaches Capital stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q3 2024 investor letter:
Lithia Motors, Inc. reported earnings, which were expectedly weaker year-over-year, but results were still better than feared. The shares have run up quite a bit since our initial purchase, but we still own them at a price at which I believe is a significant discount to their intrinsic value.
Wall Street analysts are also bullish on LAD, with a consensus Buy rating. It is one of the best car stocks to invest in now.
Overall LAD ranks 6th on our list of the best car stocks to invest in now. While we acknowledge the potential of LAD as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than LAD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.