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Letter to the Editor

This article originally appeared in the July 2009 Issue of INSIGHT

The Long Haul

As I put pen to paper this morning, I noticed that U.S. stocks were rising, as investors searched for bargains one day after shares fell to a ten-week low yesterday. Rumors about a possible second government stimulus plan made Wall Street a little nervous. Clearly, traders are a bit jumpy, not knowing precisely what an economic recovery could look like, or if it has already started to happen, but encouraged by word from the International Monetary Fund. The Fund stated that the global economy is starting to pull out of recession, but the recovery will be sluggish.

G8 leaders, meeting in Italy this week, said that the world economy still faces what a summit draft document called “significant risks.” I suppose, after the recklessness of banks and consumers alike during the last few years, a bit of caution is probably a good thing, especially since corporate earnings reports are expected to be weak. At any rate, our stock chart reflects the fleeting optimism for a quick recovery felt in June on Wall Street.

Genuine Parts Company has named Paul D. Donahue President of the U.S. Automotive Parts Group. Donahue was previously responsible for several of the Company's automotive business units as Executive Vice President since 2007. Although its per share price rose a tiny bit since May, it is still down almost 16 percent YTD.

LKQ’s per share price turned upward nicely in June, as did Copart’s.

The big winners in our stock chart this month are the national car dealerships. It is amazing to me that they are all trading at considerably higher per share prices YTD. AutoNation and CarMax are both up about 60 percent YTD. The Penske Automotive Group, with a per share price of $15.42, is up about 81 percent YTD. Sonic Automotive, probably the most dented and dinged of them all on Wall Street for the first half of 2009, is trading a share of stock for over $10 now, a leap of nearly 150 percent since its January posting.

I am puzzled - yet encouraged by this. However, I am saddened, as most of you are, too, by the loss of so many independent vehicle dealers who have lost their franchises during the General Motors restructuring. Change is never easy, but, over the long haul, regularily needed.

Insurer stocks, according to a Barron’s analysis, will begin to do a little better at the Dow beginning this month. Our publicly traded insurer stock prices certainly do not even hint at improvement, at least not yet. Actually, Progressive’s per share price is up just a hair YTD, but Allstate continues to languish, with a per share price down nearly 27 percent from its New Year’s mark.

-Charles Baker-

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