4. Group 1 Automotive, Inc. (NYSE:GPI)
Number of Hedge Fund Holders: 38
Group 1 Automotive, Inc. (NYSE:GPI) is one of the best auto and truck dealership stocks according to hedge funds. It was held by 38 hedge funds during Q1 2024, with total stakes worth $496.174 million.
Group 1 Automotive, Inc. (NYSE:GPI) is a Fortune 500 company and a leading automotive retailer in the United States and the United Kingdom. The company sells new and used vehicles including cars, light trucks, and vehicle parts. The company is also involved in arranging vehicle financing and insurance contracts. Group 1 Automotive, Inc. (NYSE:GPI) has a total of 260 dealerships, 337 franchises, and 45 collision centres across the US and UK. The company also operates an omni-channel platform that helps customers access its services.
What sets Group 1 Automotive, Inc. (NYSE:GPI) apart from its competitors is its ability to leverage its omni-channel platform, during market challenges such as the CDK outage to deliver record revenues. The company reported a total revenue of $4.7 billion, which increased 3% year-over-year on the back of new vehicle revenue of $2.4 billion. The new vehicle sales for the company in the US were up 7%, reflecting resilient demand and management’s focus on driving volume. Group 1 Automotive, Inc. (NYSE:GPI) was able to pull off record sales during the quarter due to an effective transition to its omni-channel platform during the CDK outage. Moreover, the company has been acquiring dealerships throughout the quarter to grow its market share. It acquired 4 Mercedes-Benz dealerships and UK operations of Inchcape, a prominent automotive distributor and retailer with operations worldwide. The acquisitions will not only add to the dealership portfolio of the company but will open new avenues of growth in the future.
Should you invest in Group 1 Automotive, Inc. (NYSE:GPI)?
Group 1 Automotive, Inc. (NYSE:GPI) can be a good investment considering it has delivered an exceptional quarter during tough conditions. Moreover, the company has a history of generating healthy revenue and profits. Over the past decade the company has been able to grow its top line by 7% and its bottom line by over 18%. Moreover, the stock is trading at 8 times its forward earnings, which is a 43% discount to its peers. Given that earnings are expected to grow by 2.31% this year to $9.72, the stock is cheap.
Nine analysts have a consensus Buy opinion on the stock and their 12-month median price target of $367.5 represents an upside of 8% from current levels.
Conventum – Alluvium Global Fund stated the following regarding Group 1 Automotive, Inc. (NYSE:GPI) in its Q2 2024 investor letter:
As most readers know, the Fund is constrained by “risk” regulations, one of which stipulates that no more than 40% of the Fund’s assets can be held in positions of above 5% and no position can be greater than 10% (known as the 5/10/40 rule). By early May, as a result of our March buying and the share price rising, Group 1 Automotive, Inc. (NYSE:GPI) (up 1.9%) had come to represent more than 5% of the Fund’s assets. Whilst we like Group 1, we also like all the other Fund holdings that are above 5%. And, unlike those, when it comes to Group 1 there is another attractive company in the same sector available for our investment. 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.
