Why BMW is the best STOCK in the AUTOMOBILE INDUSTRY? 🚙
I have been telling you that BMW $BMW.DE is the best company in the car industry, not Tesla $TSLA , not Nio $NIO or any other car company. This month, however, I sold all my shares of BMW(at a lost), why did I do that? And why I still believe that BMW is the best investment you can make in the automobile industry?
BMW currently sells around 2.3 million cars a year. In comparison, companies such as General Motors $GM , Toyota $TM or Volkswagen Group $VOW3.DE sell over 10 million cars a year. This means that BMW are focusing on a smaller niche compared to these bigger car companies. BWM sells to the high end niche, that is, to rich people. There is a saying that if you are selling to everybody, you are selling to nobody. The BMW Group itself is made of 3 brands BMW, Rolls Royce and Mini, all three targeting the rich and super rich. Let's take for example, Rolls Royce, the starting price for a Rolls Royce Phantom(my dream car) is $400 000. BMW last year sold around 3000 Rolls Royce and they can make a minimum of $1.2 billions in revenues from these. They don't need to sell millions of cars to make money. It is the same thing for Apple $AAPL and the iPhone. That's why Apple is the most profitable company in the world while BMW has the highest profit margin in the car industry. They currently have a profit margin of 8% while other car companies have around 4%.
The stock price of BMW has been falling in recent years and it is for several reasons such as the trade war and Brexit. But if we should think about the future and the future is electric vehicles and autonomous vehicles. The main player there is Tesla but Tesla has a massive problem. The company has a lot of debt, has a massive deficit and is still not profitable. This is not a company for me but now if I have to choose only one car company to invest in, I will invest in BMW without any doubt.
Why did I sell my shares then? It is because I want to focus on only a few companies. I don't want to wait for the company to recover. It is better for me to accept the fact that I made a mistake and I lost some money, now I have to move on and invest that money somewhere else. The automobile industry is capital intensive industry and it is something that requires a high margin of safety for me to make an investment. That's the reason why I'm not investing in any car company for the time being.
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