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EPIC EVENT: Warren Buffet, the smartest investor ever, Buys Car Dealerships.

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joe.pistell

joe.pistell

Uncle Joe
Apr 7, 2009
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Joe
#1
note: I spent a decade self-employed as a stock trader. Here is my high-level look at Warren Buffett's $BRKA buying Van Tuyl.

My Summary:
The greatest investor of all time, Warren Buffett, has bought Van Tuyl and will give them mountains of cash to buy more stores. This will wake up Wall Street to come into our space in a way that we haven't seen before.

If you're a Dealer principal, now is the time to get your house in order. Work hard to make connections needed to get yourself into a bidding war. If your a dealership employee or manager, don't worry, relax, this is a multi-year process and it's win-win for you. Many Dealer Principal's will be spending money to get their top line looking strong (your commission checks go higher ;-).
 
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#2
About Warren Buffett:
Warren Buffet and his partner Charlie Munger, run Berkshire Hathaway $BRKA and they are the smartest investors... ever.

For example, If your dad bought one share of Berkshire Hathaway at the IPO in the early 80's for $245, today that single share is worth $206,250.00. Gulp!

What's the Alpha of $BRKA vs S&P500 over this period? BRK-A Basic Chart | Berkshire Hathaway Inc. Common Stock - Yahoo! Finance That chart will show you a a multi-decade trend where Buffet's investment process has blown away the overall market.

Buffet and Munger are highly disciplined. They have a process by which they arrive at their investment decisions. They always buy businesses that is easy to understand, is under-valued (according to their model) and holds an important place in their field.

One of Warren's favorite purchase models is to purchase highly successful family owned businesses who's growth is hampered by the families internal conflicts. Buffett like to solve this problem. Family members enjoy the cash from the purchase and retain their roles. The new ownership structure makes them employees of the company and many of the family squabbles disappear. I'm not saying that this is Van Tuyl story, but I am saying it's one of Warren's favorite investments.

Buffett is a hands-off owner. He buys the business AND the management, gives them tools to succeed (more cash ;-) and then he gets out of their way.
 
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#3
"Ok", you say, "WTF is going on here?"

It's called a "roll-up". A roll-up merger occurs when investors buy up companies in the same market and merge them together. Investors like rollups. Merging companies can reduce costs (internal and external), can increase valuations (i.e. the whole is greater than their sum 1+1+1 = 5).

All across United States there are tens of thousands of independently owned franchised car dealers. Wall Street calls this a "fragmented market". There's no central brand that represents a dealer experience (something like Home Depot or Lowe's or Walmart, Panera or McDonald's).

This roll-up theme is not new. Sonic, Mile One, Group1, Lithia, Penske, Asbury, AutoNation and others.
 
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#6
Buffett has always been heavy into the insurance sector - and the retail auto biz is a perfect way for him to add to his insurance portfolio (i.e. more investable cash through the float) especially with the size of Van Tuyl
 
#8
I'm both anxious and excited for what this means.
The money that enters the industry should be interesting, but this could be a game changer.

On the other hand, it could mean nothing for the next 3-5 years as he builds a strategy and acquires key companies and service providers across the industry.
 
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#10
KevinO said:
Joe: Why Now; Any idea?
Click to expand...


He loves the new car smell and Money!

Nothing complicated here. As Amy Wilson noted in Automotive News in March: "In 2013, the average U.S. dealership produced return on equity of 29 percent, according to the National Automobile Dealers Association. That figure has risen in four of the past five years and is now more than double the 12 percent return recorded in 2008 when U.S. vehicle sales collapsed."

Here's Why Warren Buffett Is Buying Car Dealerships - Business Insider


Here's are some funny pics!
Buffett.jpg

Warren Buffett traded in his 2006 Cadillac to purchase his new 2014 Cadillac XTS in July 2014 and must of fell in love with the new car smell.
140715171222-buffett-cadillac-xts-620xa.jpg
 
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