Bottom-Up Automotive Analysis

Time to Equity By Daniel Ruiz Blinders Off, LLC My approach to analysis consists of starting with a specific sector of the auto industry then peeling back one layer at a time until I truly understand how it works. More often than not, I find used vehicle values staring back at me by the time I get to the core of various sectors. This is why I’ve said many times that used vehicle values are the foundation for the entire auto industry. I’ve devoted a lot of time and effort in the search for data to support this theory. I knew that if successful, I could use that data to better understand the cyclical nature of the industry and to more accurately predict future performance. I now feel very confident that I’ve found what I was searching for. I’ll start with a quick recap for those that are unfamiliar with my work. Why Used Vehicle Values? I believe that only jobs and credit are more important than used vehicle to the health of the automotive industry. I say this becau...

By Daniel Ruiz Blinders Off, LLC Until this point, a lot of what I've shared with you is theoretically based on my knowledge and experience of used vehicle values and how I believe they affect new vehicle sales velocity. Today, I am going to share some some hard data that I've been researching with a great deal of effort. I genuinely believe that used vehicle values have a very significant effect on new vehicle sales velocity. I have explained it on Twitter and on a previous blog post through the concept of trade cycles. Because of this, I am certain that used vehicle values can be used as a leading indicator for inventory management at the manufacturing level, at the retail dealer level and certainly as an investment tool. However, I humbly hold that current used vehicle value indexes sources are not good enough. There is a very specific group of vehicles that can be monitored in order to better project results. The Manheim and NADA index both have too much noise i...

By Daniel Ruiz Blinders Off, LLC As a disciplinarian in the automotive sector, my focal point is concentrated on the study of used vehicle values and how they affect the automotive industry as a whole.  Measure the Cause to Predict the Effect There are several subcategories that help predict the trajectory of used vehicle values that I use as leading indicators . For example, there is a very strong correlation between the performance of Hertz stock and used vehicle values. In June, while the stock was trading at multi-year lows due to excessive pessimism, I witnessed used vehicle values begin to stabilize. I also noticed the amount of vehicles available from Hertz at auction fall drastically. These events made me believe that a strategy change was at hand. Was Hertz reducing the size of their fleet as they have in the past during difficult times? Would Hertz focus on better utilization rates and other cost saving measures? My suspicions proved to be corre...

By Daniel Ruiz Blinders Off, LLC To better understand why the automotive industry is in the middle of a perfect storm , first go back and consider the also perfect set of events that led to a robust recovery and a record setting 2016 sales year. Our Last Recession In 2009, the automotive industry faced a great challenge. New light vehicle sales dropped to 10.4 million, GM and Chrysler went through bankruptcy reorganizations, retail dealers closed and many folks lost their jobs. The US  government felt the need to act in order to support the very vital automotive industry (3% of GDP & 10% of manufacturing). The Fed also stepped in to help stimulate the overall economy by reducing interest rates. Consumer Purchasing Power For the purpose of this piece, the central focus will be placed on the purchasing power of the consumer. With no bottom in sight for falling new vehicle sales, our government attempted to stimulate demand by approving the 3 billion dollar...