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Letter to the Editor
This article originally appeared in the June 2002 Issue of INSIGHT
A Half-Full Glass
Is the glass half full or half empty? Well, when it comes to the securities relating to collision repair, including insurance, it is just over half full with one more stock up for this month than down.
While the Market as a whole seems to be recovering, we still have laggard stocks on our list, including Copart, eAutoClaims, Parts.com, Snap On, and our old friend Driversshield.com, now renamed just Driversshield, recognizing that the dot com suffix was a liability not an asset.
As an aside, I talked to several shop owners doing work for Driversshield and, not surprisingly, all have managed to add the 12 percent discount to Driversshield back into the cost of repair; some by inflating the door rate and others by adding hours. So much for insurer savings.
The paint business must be getting better, with PPG, Sherwin-Williams, BASF, DuPont, and Valspar all showing nice increases in value on a YTD basis. While with all of these companies Auto Refinish is a small part of total sales, it is a significant profit center for most.
While refinish volume has been impacted by lower claims frequency, producers have moved quickly in the first five months of the year to control and reduce costs, both through manpower cuts and streamlining product lines.
One industry-related company that may be thinking about half empty glasses is CCC Information Systems, which seems to have been struggling on all fronts. CCC's move into the European Market through Carter and Carter in England turned out to be a disaster costing millions of dollars. DriveLogic does not seem to be going anywhere. Now the company has cut costs and is concentrating on core business. However, the number of insurers that should be CCC's target customers has dropped to 350 or so from 450 several years ago.
Parts.com continues its struggle, with what must probably be a world record-breaking drop from around $200 per share at one point to nine cents per share today. Talk about an empty glass! The Parts.com software is reportedly good, but the concept of selling crash parts on the Internet in volume is perhaps flawed.
Progressive, with a high PE ratio, is doing well after its recent stock split. This insurer has an aggressive marketing plan and innovative claims handling, e.g. the Concierge Program in Cleveland and an energetic direct repair program in Cincinnati, both striving to reduce cycle time with close management and directed insureds, e.g. fixed appointment times, etc.
I am developing some optimism while looking at our Collision Repair Industry related stock indices’ glass. It is looking pretty full this month, with each of our indices outperforming the Dow Jones. The INSIGHT Fund Index is up almost 13 percent and the Parts and Equipment Index is up over 23 percent YTD.
-Charles Baker-
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