10 Best Auto and Truck Dealership Stocks to Invest In

5. AutoNation, Inc. (NYSE:AN)

Number of Hedge Fund Holders: 32

AutoNation, Inc. (NYSE:AN) is a major automotive retailer in the United States, primarily involved in selling both new and used vehicles. The company operates through three main segments including Domestic, Imports, and Premium Luxury, selling vehicles ranging from American automakers like General Motors to luxury brands such as Mercedes-Benz and BMW. In addition to selling vehicles, the company also offers automotive repair and maintenance services and arranges financing for vehicle purchases.

AutoNation, Inc. (NYSE:AN) faced challenges due to a cyberattack on CDK Global, which is a major software provider for the automotive industry. As a result, its revenue of $6.6 billion decreased 4% year-over-year. The gross profit also took a hit and dropped 9% year-over-year to $1.2 billion, however, the gross profit showed a sequential improvement of +2% led by Customer Financial Services (CFS) and After-Sales growth.

Despite the headwinds, management was still able to increase its market share in new vehicle sales, achieving a 2% growth in same-store units across all segments. It also strategically divested eight underperforming stores during the quarter, generating over $150 million in proceeds. This decision was part of a strategy to optimize their portfolio and take advantage of favorable market valuations before they declined. Looking ahead, AutoNation, Inc. (NYSE:AN) anticipates improved performance in the fourth quarter, particularly in new vehicle sales. The company is also optimistic about moderating interest rates and plans to leverage capital for acquisitions that promise higher returns for shareholders.

Conventum – Alluvium Global Fund stated the following regarding AutoNation, Inc. (NYSE:AN) in its Q2 2024 investor letter:

“AutoNation, Inc. (NYSE:AN) (down 3.7%) operates around 350 dealer franchises across the US, as well as collision centres and used vehicle stores. When compared to Group 1, it sells more units at a slightly higher price and margin, and derives around 50% more revenue. But its strategy is different, with nationwide branding and centralised operations. Although we prefer the Group 1 model, the economics of Autonation look attractive to us. And by introducing this into the portfolio we could thereby invest more than 5% of assets in this sector without necessitating the sale of other attractive large positions. And so after selling a little Group 1 and buying Autonation we ended the quarter with 4.1% and 1.9% positions respectively.”