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Letter to the Editor

This article originally appeared in the February 2005 Issue of INSIGHT

Buy a Car This Year

Just to show how slow a start Wall Street had for the first two weeks of 2005, at least as far as Collision Repair Industry related stocks go, our best performer is eAutoClaims to date, up 15 percent YTD - to a tiny 23 cents, to be sure but still up. Only 3M, AutoNation, and the Boyd Group showed any positive percentages YTD otherwise, as of January 15. Even our insurers were down a bit across the board. Ah well! The year is new and I notice today, as I pen this column a bit later than usual, that the Dow is up over 135 points from yesterday’s close, to 10,498. This figure is, however, still below the start of the New Year’s mark of 10,783. For what it’s worth, finance experts are cautiously optimistic.

We are adding two industry stocks to our stock chart for 2005: CarMax (KMX on the NYSE) and Sonic Automotive (SAH on the NYSE).

Headquartered in Glen Allen, VA, CarMax, Inc. is a specialty retailer of used cars and light-trucks in the United States. It conducts its used vehicle operations in three basic retail formats: mega, standard, and satellite superstores. Used vehicles represent 91 percent of the total vehicle units sold by CarMax. Austin Ligon is the company’s president and CEO.

Sonic Automotive, Inc. is an automotive retailer based in Charlotte, NC, headed by president and CEO Jeffrey Rachor. Sonic operates 189 dealership franchises, representing 37 different brands of cars and light trucks, at 151 locations, and 40 collision repair centers in 15 states. These dealerships provide comprehensive services, including sales of both new and used cars and light trucks; sales of replacement parts; performance of vehicle maintenance; warranty; paint and collision repair services, and arrangement of extended warranty contracts, financing and insurance for customers. In 2003, 61.8 percent of Sonic Automotive's revenue came from new vehicle sales; 15.9 percent from the sales of used vehicles; 13.4 percent was from parts, service, and collision repair; 6.1 percent was from sales of wholesale vehicles, and 3 percent was from finance and insurance.

These additions to our stock chart certainly increase the presence of vehicle sales companies, represented by Auto-Nation and United Auto Group already. For the sake of my blood pressure and INSIGHT’s Supplier Index, I certainly hope new and used car sales go up a lot this year.

Calendar year sales for 2004 were reported up about ten percent by 3M. Full-year volume growth for 2005 is expected to be between five and eight percent. W. James McNerney, Jr., 3M chairman and CEO, attributed the healthy condition of the international company to the "enduring strength of the 3M business model, a model that has been improved and significantly strengthened." The company’s model of multiple technology platforms, leadership positions in diverse markets, and well-integrated corporate initiatives continues to work well for 3M.

-Charles Baker-

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