| Rail Traffic: Another Positive Indicator Zacks.com submits: If the economy is really getting back on track, then there should be some pick up in the movement of goods around the country. We now have some evidence that this is happening. Total rail shipments were down just 10.7% from year-ago levels in the last week. That is a nice improvement over the four-week average of a 13.8% year-over-year decline, which in turn is an improvement over the quarter to date 16.6% decline and even better than the year to date 18.1% decline. Two major areas have now moved into positive year over year comparisons: grains and chemicals.Complete Story » seekingalpha.com |
Winnebago Industries, Inc. F1Q10 (Qtr End 11/28/09) Earnings Call Transcript Winnebago Industries, Inc. (WGO)F1Q10 Earnings CallDecember 17, 2009 10:00 am ETComplete Story » seekingalpha.com |
Exploring Energy Efficiency in the Automotive Sector John Petersen submits:As a result of sweeping regulatory changes, the second decade of the new millennium is shaping up as a time of unprecedented progress in automotive fuel efficiency. In the EU, where small cars have been prevalent for decades, gasoline prices of $5 to $8 per gallon are the norm and consumers prize diesel engines, new regulations will require automakers to reduce tailpipe CO2 emissions to an average of 130 grams per kilometer (g/km) as follows:For 65% of the fleet, by 2012;For 75% of the fleet, by 2013;For 85% of the fleet, by 2014; andFor 100% of the fleet, by 2015.The penalties for non-compliance start at €5 per vehicle for the first g/km, and ramp up to €15 per vehicle for the second g/km, €25 per vehicle for the third g/km, and €95 per vehicle for each subsequent g/km. The EU's long-term target is 95 g/km by 2020. The following data comes from the European Federation for Transport and Environment and shows how automakers stacked up against the standards in 2008.Complete Story » seekingalpha.com |
CarMax Benefits From a Nationwide Used Car Shortage Steve Hosaflook submits: Warren Buffett recently reduced his stake in several companies including CarMax (KMX), in an effort to replenish his cash position after his enormous purchase of Burlington Northern, (BNI). Also this week, Credit Suisse upgraded their price target on CarMax to $23. The stock was above $24, the day of their “upgrade.” The reason given for their upgrade was continued improvement in KMX’s finance unit.Seasonality and a used car shortage will also greatly help CarMax over the next quarter. The summer months are historically stronger than any other quarter in the automotive retail industry. However, it is the industry’s shortage of supply which has caused a seismic shift in how these companies operate. Currently, the Used Car Industry is experiencing a significant used car shortage. This shortage of inventory will put a solid floor underneath CarMax’s inventory, allowing the company to increase margins. This point is extremely significant, because used car inventory normally constantly depreciates. Further, during this period of supply shortage, CarMax’s ability to source used car inventory will give them a significant advantage over their competition. If unemployment was 5% and credit markets were healthy and flowing, KMX and the rest of the automotive retailers would be a screaming buy coming into the summer quarter. However, we have to trade the market we have, not the market we want, and the market we have is extremely dangerous for both longs and shorts. Once again, market volatility is above 40. We had a “flash crash,” followed by a huge gap-up last Monday, followed by several extreme moves to the downside. Lastly, contagion in the euro-zone is becoming a real possibility.These things make it extremely risky to simply be long a consumer discretionary stock that is heavily dependent on consumer confidence and the credit markets functioning properly. However, this does seem like a good opportunity to put on a pairs trade. I especially like a pairs trade that plays into the theme of a significant European slow down. Yes, we may be slow in the US, but Europe is definitely going to be slow for the next two quarters (projecting farther than that in today’s market is extremely difficult). We are coming into Europe’s vacation season when the entire continent slows down, which follows months of volcanic ash decimating European travel. Add too these things: social unrest, political tensions, austerity measures, significant pressure on European banks and the widening of credit spreads leads and you have to come to the conclusion that Europe will be slow.CarMax derives 100% of their business domestically; matching them with a heavily European focused automotive company makes sense. Daimler (DAI) is best of breed, which leads me to Fiat. Vehicle sales are already being affected in the eurozone. The CCFA, French Automobile Manufacturers Association reported Monday that vehicle sales have begun decelerating from previous months. One of the most difficult parts of this trade is simply putting the trade on, since Fiat ((F.MI)) trades on the Milan Market. But, for those of you with access to European markets, this might be an interesting pairs trade.Unfortunately, because of Fiat’s exposure to the US through Chrysler, this won’t be a pure play on US strength vs. European weakness. If contagion spreads to US banks and lending gets cut off again, it will obviously affect all automotive companies operating in the United States. However, this will punish CarMax less than Fiat/Chrysler. If credit seizes again and the US experiences a double dip, the American consumer will favor used vehicles to new vehicles. With volatility here and abroad, large price swings will once again be the norm in our markets, especially in the consumer discretionary stocks. Large up and down moves provide excellent entry points for a pairs trade, and I would expect several large up and down moves over the course of the next few weeks.Disclosure: No positionsComplete Story » seekingalpha.com |
Spirit AeroSystems Faces Call Selling optionMONSTER submits: By Chris McKhann Option traders are betting today that shares of Spirit AeroSystems (SPR) will be unable to regain recent highs. Complete Story » seekingalpha.com |