5 Best Used Car Stocks To Buy Now

2. Lithia Motors, Inc. (NYSE:LAD)

Number of Hedge Fund Holders: 40

Lithia Motors, Inc. (NYSE:LAD) is an American automotive retailer that offers new and used vehicles, vehicle financing services, warranties, insurance contracts, vehicle and theft protection services, and automotive repair and maintenance services. On October 19, Lithia Motors (NYSE:LAD) declared a quarterly dividend of $0.42 per share, in line with previous. The dividend is payable on November 18, to shareholders of record on November 11. Lithia Motors, Inc. (NYSE:LAD) is one of the best used car stocks to invest in. 

On October 21, Benchmark analyst Michael Ward reiterated a Buy recommendation on Lithia Motors (NYSE:LAD) but lowered the price target on the stock to $300 from $400 after trimming his earnings assumptions. While he believes variable gross margin for the auto dealer group will move lower from present performance, the analyst forecasts profitability to “settle at higher levels than in the past.” 

According to Insider Monkey’s data, 40 hedge funds were bullish on Lithia Motors (NYSE:LAD) at the end of June 2022, compared to 46 funds in the preceding quarter. David Abrams’ Abrams Capital Management is the biggest position holder in the company, with 2.35 million shares worth $646 million. 

Here is what Oakmark Select Fund has to say about Lithia Motors, Inc. (NYSE:LAD) in its Q1 2022 investor letter: 

“As is typical during periods of significant volatility, we added a new name to the portfolio. Lithia Motors (NYSE:LAD) is the largest franchised auto dealer group in the United States. The company has a long history of creating shareholder value through best-in-class operations and consistent acquisitions of smaller dealers at attractive returns. There is a long runway for management to continue creating value through such acquisitions. Management believes this will drive earnings per share to more than $50 by 2025, even as car prices return to pre-pandemic levels. Meanwhile, Lithia has a significant opportunity to further accelerate growth through Driveway, its online auto retailing platform. We believe Lithia’s existing nationwide infrastructure provides Driveway with significant competitive advantages in e-commerce, which smaller dealers will struggle to replicate. Driveway is not generating any earnings today, but it could become a major contributor over the next five to seven years. With the stock priced at less than 7x management’s 2025 EPS target and with substantial future growth potential from Driveway, we believe Lithia shares are a bargain today.”