10 Best Auto and Truck Dealership Stocks to Invest In

6. Asbury Automotive Group, Inc. (NYSE:ABG)

Number of Hedge Fund Holders: 30

Asbury Automotive Group, Inc. (NYSE:ABG) is a major automotive retailer in the United States, primarily engaged in selling vehicles and providing related services. The company operates around 154 dealerships that sell both new and used vehicles from various brands, including American, European, and Asian manufacturers. In addition, it also offers a range of repair and maintenance services including vehicle repair, replacement parts, and collision repair services.

While the company faced challenges from inventory level normalization, brand challenges, and the hurricane, it was still able to deliver robust performance across the board. During the fiscal third quarter of 2024, Asbury Automotive Group, Inc. (NYSE:ABG) delivered $4.2 billion in revenue, up 16% year-over-year. The growth was driven by a 16% increase in new vehicle revenue and a 13% increase coming from its Parts and Service segment.

Madison Mid Cap Fund announced adding Asbury Automotive Group, Inc. (NYSE:ABG) to its portfolio in its Q3 2024 investor letter, stating that such companies tend to earn more profits from their parts and services segments in periods of tough economic cycles. The anticipation stood true for the company as during the third quarter while sales of new and used vehicles were up 16% and 13% respectively, gross profits decreased 11% and 6% at the same time. However, the Parts and Services segment gross profits improved by 16%, thereby neutralizing the overall gross margin decrease to only 142 bps year-over-year. It is one of the best auto and truck dealership stocks to invest in.

Madison Mid Cap Fund stated the following regarding Asbury Automotive Group, Inc. (NYSE:ABG) in its Q3 2024 investor letter:

“During the quarter we added three new holdings: Graco, Lithia Motors, and Asbury Automotive Group, Inc. (NYSE:ABG). We purchased shares in Lithia Motors and Asbury Automotive, two of the largest auto franchise dealer groups in the country, owning a diversified portfolio of dealerships ranging from Toyota to Ford to Mercedes. Investors tend to pay a lot of attention to the level of new car sales, but dealers actually earn more in profits from parts and service than they do from selling new cars, and this steady business provides a nice ballast throughout the economic cycle. In addition, we believe these businesses have a long runway to create value via consolidation of this fragmented industry, as the advantages of scale are increasing.”