I looked at the top 12 Car Stocks! Which is the BEST BUY?

Good day fellow investors. My white propeller in a blue sky is getting past 256,000 kilometers. All still works well. It's a great car, great machine. However, just as prevention, I have started to look for solution to replacement just to avoid the 300 350k issues. And to do that, you look at the stock market, what the companies are doing, what's the environment. So, we have two solutions for today. Investing in car stocks and also perhaps helping you in buying or not buying a new car secondhand or whatn not. Volkswagen stock looks ugly over the last few years. Similarly, Mercedes, Stellantis is terrible. Exor not doing that terrible as they have Ferrari that is saving their behinds but okay Ford stable just a dividend across the cycles. Tesla remains Tesla nothing to add on that one but we'll discuss that too. Toyota is doing well. BYD boomed now is stalling a little bit. General Motors is doing great. Hyundai became an AI robotics. Now it has weakened a little bit but is still double what it was a year and something ago. Porsche ugly. And for those who don't know me, my name is Sen. I have been writing about stocks and stocks investing for more than a decade now. This is a 2015 seeking alpha article where I analyzed the cyclical automotive industry in a mega growth cycle. A lot has changed. Now we have China that wasn't on the radar back then as a big player creating competition. But perhaps most importantly, I cited there an article from Martin B. Zimmerman, a vice president of Ford, where he discussed it prior to the 2009 crisis and he said the following. A good year industry 15 million units in the US severe recession is 13 million units and that over 15% drop is really the difference between decent performance and severe losses. That cyclicality is something you have to accept when it comes to investing in car stocks. We're going to look at the top 14 car stocks out there, even Stellantis. And if you don't want to look the whole video, even if I suggest you do, here is the conclusion. No mode Chinese competition. You might get the bounce. Stalantis might bounce on some good news over the next year. It might double, but it will go bust in the next 10 to 15 years. No matter what we think about it, when it comes to investing in car stocks, you have low or no investment return. The industry is turning from cars to tech to robo taxes. Highly competition. The customer will win there. Old legacy cannot compete. New players are rising up. Perhaps they will buy old legacy on the cheap. But I think they will first let them go bankrupt and then buy only what is valuable. Can tariffs help? Yes, tariffs can help American producers, but that is just temporary and uh increases the discrepancy long term. And I don't know whether your voters are happy paying much much more than others for cars on buying a car. Now given all the technological advancements, the car industry and what we have now might be obsolete in 5 years. So it is a high depreciation risk there. So we might think perhaps the best value now is secondhand. We'll discuss that more. 50% down 1.5 years old new cars practically new with 5K 10k on the autometer. You don't believe it? Well, watch the video. Perhaps you won't buy car stocks, but you might buy a nice car for you. Let's start immediately with the largest market capitalization car stock of them all, which is of course Tesla. Now, I have been a bear on Tesla for ages now, but the stock just keeps going up. Nothing can stop Elon Musk. Let's look a little bit at the results. And Elen, I told you this is stupidity. A robot doesn't have to look at the laptop, doesn't have to use the mouse to work. Now we have Wi-Fi and such connections. So please Elon remove this stupidity. Apart from that finally a good quarter for Tesla growing but gross margin down which means prices are lower compared to the costs operating margin down ebitita down everything apart from sales is down and free cash flow turned negative so I was completely right on being negative on Tesla's fundamentals that has material realized. So, I was right on that. I was wrong on the stock price, but you can never go short a cult. Now, we still have Model 3 and Y production that's going on, that's growing. And the most important thing, the cyber cap, the robot taxes are coming as that takes over the market. Optimus also in construction always these promises. The same was there for automotive. Did it deliver long-term durable profits? No. Will this deliver long-term durable profits? No. But as long Elon can keep the charade and the narrative of the promises mining on wherever with SpaceX, Tesla will beat everything else. Robbo taxes are coming and the market loves it. outlook more growth vertical integration in the Tesla ecosystem. The P ratio is 339 crazy P ratio but it's on future promises on this ecosystem where we have robo taxes vehicles charging networks everything will be like Tesla wants it. If the robo taxes actually work, there will mean less cars, which means return on the cars actually over the time will be zero. Same for robo taxes, but you never know with Tesla. I'm still bearish. I was right on the fundamentals. It would surprise me if they ever make long-term sustainable profits because they are in highly competitive industries. highly competitive industries that we'll discuss as we look at all other car companies out there. Now we are speaking of Toyota. Everything looks good a little bit. The yen is weakening so it looks like more growth but there is some growth. If I look a little bit the numbers okay standard. However they're mostly paying dividends some repurchases less repurchases but okay the dividend yield is 3%. They are global selling most of their cars in North America and Asia. So US company practically strategy and road map self-driving technology commercially. So also coming there self-driving robo taxes even Toyota is doing that. When it comes to Toyota I'm looking a little bit at the capital expenditure and the dividend and then I compare the depreciation and amortization with the capital expenditure. The capital expendure is 34 trillion yen but depreciation and mortization never surpasses two trillion. So how come if you spend this time this means that this also needs to go up and that doesn't go up. Looked a little bit I didn't go deeper but they say it's because they acquire the cars then of leasing or things like that and then these acquired cars are capital expenditure but I don't really buy that. The true cost should be a little bit higher, I think, of operating. Something to dig deeper if you're going to invest in Toyota. I'm not going to invest in Toyota at a 3% dividend yield. Too complex. Therefore, for me, if we see a slowdown, North America, Europe, this comes out perhaps on top of it, you can lose a lot of your investment. Really, not for me. The Japanese have been subsidizing their stock market, things like that too much craziness and not worth the stock price. We go to BYD. It was nothing. Then it boomed and now it's stabilized there. Full damage coverage for intelligent parking. They are launching their autonomous drive. Sales have been growing. stalled a little bit, but this is perhaps the key from their presentation. How cars are not cars anymore. Cars are chips now and car companies doing their own chips. Very interesting. Similarly, Xiaomi, we have discussed it in a video, fairly priced for what it offers. However, again, technology, phones, cars competing with the rest of the world. And this is where the legacy providers simply can't compete. If you have tariffs, you can do well for a while. If you look at GM, everything looks good. High huge cash flows. Americans are happy to pay more for their cars. That's why you have more inflation. But nothing wrong with protecting one's own industry. Okay, stocks are doing good revenues, stable margins, improving a little bit, huge cash flows. However, again, if we go to a US recession that might happen in two years, then this GM investment is a terrible one and can easily go down to lows. It went bust in 20089 was saved by the government then public again and now we are at peak good times if there are any bad times this is a very risky investment now of course it can go higher but it's just a matter of timing we continue we have Ferrari exor now Ferrari I discussed it six months ago that's my stock analysis also discuss exor Nothing to add on that. Ferrari is too highly priced for what it offers in my eyes. Exor the discount. We discussed why it is there. But okay, Hyundai Motor Company. Now here I must say I have a bias. This was my first car that I bought and uh it was a great car. I did a lot of things with it. It's pulled my boat around the world. Then another car that I bought 13 years later or 12 years later in 2015 when we moved to the Netherlands, I paid €600 for this car and we made 50,000 kilometers with this car. And the most important thing, my wife didn't leave me when I came home with this and she drove around with this for 2 years. the clutch had a little issue and he couldn't put it into first gear at some point and she hated that. But this allowed us to take a mortgage for the house because we didn't take any financing for a new car. The rest is history. So, it's a great time to be at Hyundai. Everything is growing good, but nothing crazy. 2% up. They're raising their 2030 guidance and every company operating margin. inhibit this or this everything will go up everything will double from 6 to 7% to 9 and higher I remember 2021 Ford capital markets but stalantis all of them electrification will be the new thing batteries what will happen we will increase our EBIT margin to 8% crazy projections and now whenever I look at these long-term guidance projections from these companies still everything is there same numbers same promises likely new CEOs but it is what it is road map for growth also they have robot taxes micromobility and robotics that's what boommed their application of AI they have 100 new global product launches 58 the states targeting everything growing competing with the rest of the world they will turn around their Chinese situation again promises even Hyundai is doing promises acquired Boston Dynamics booming everywhere investment 26 billion invested in the US then Trump is happy then Trump is unhappy then Trump rates the factories things like that but okay and this is perhaps what is key it's turning into a tech data a company and that is what can change the whole industry on Hyundai. No miracles, too expensive given the AI bubble priced. And that's Hyundai. Fourth, looking good. Growth in revenue, improving margins a little bit. They still have the electric promises that are now impairments, but okay. Everything else is growing. Special items are the negative part. Without those everything would be much more in the positive. But those special items will always come. Going back to the recession, when was the last time the US saw a recession? That was 17 years ago. What did total vehicle sales in the US do? Those crashed GM went bust for for fair and ugly time. Always investing, always for the positive. But nobody never from the car maker industry is ready for recessions. And this is what happens in a recession. If this happens, all the promises Ford and GM everyone is making gets very very ugly. And for 4% or maybe future 3 4% dividend yields, these companies now my friends are a sane. Now, are European better with 7% dividend yields? Let me first say that I agree with Trump on this. This is the bonds overview from Mercedes. Look at the coupon prices that they have issued that over time. On average, what would that be? 1%. And there are many older bonds at 01. So, this is crazy. European subsidies where then you have the financing arms that take money from the ECB at practically zero charge 4% and sell their cars like that which is crazy. If we just look at Ford look at the coupons four times what Mercedes has to pay which is insane and as Trump rightly says not fair. So right to put tariffs, right to put tariffs, not black and white there. And what are they doing? Biggest product launch program in history. Again, new cars, new tech, everything new, constantly always investing in the new. And my friends, that's not how one makes money. There's absolutely no modes. And given the development in tech, three years from now, they will be reinventing again the new and the new. Yes, there is the Rapala brand value. What is Rapala? Just reminds me of a mino we used to use to go fishing when I was a kid. But okay, they say 50 billion brand value. Let's compare that to the market cap is 45 billion. Practically they could sell the brand and make money for shareholders. Global fan base, everything great. Mercedes, yes, it is quality. It's a great car. Sales volume, mid strategic goals, growth, uh increasing electrical vehicles, it's getting destroyed, hammered in Europe as we'll discuss in a moment. Always targets, targets, targets. And then you see the target is up but the reality is down. And as we were researching for a new car, one option is the Mercedes Eco SUV or this is the EcoE. But I looked at the prices there and a new car like this costed 90K and this is a year old car with 12,000 already depreciated by 30%. That's crazy. New technologies coming. Robbo taxes, everyone is partnering, doing it at some moment. It will work. It will work for everyone. There will be no profits. Completely throwing away the old and they have to make the new. However, they are lowering crazily the capacity to 2 million units less production in Germany because of the costs. They need to improve that 16% of sales is in the US with tariffs with this. Okay, they are trying to keep it up there. Europe doing okay still. China not doing good for European companies despite major shifts. They [snorts] are still leading but those major shifts are coming very very fast. Their target is again the promise always there margins going to 8 to 10% even Tesla wanted those margins but nobody can ever hit those margins for a longer time. And you can see here now revenue is slightly below slightly below guidance. However, the dividend yield is now 7%. 7% is already something. But then again, we have the recession, we have more issues, a global slowdown, and then they cut the dividend. And then you have those lows that are value investing lows. Wake me up on those. If we go forward, Porsche, what a terrible, terrible performance over the last few years for the stock. Then again, 5% down sales. When you are not growing, you are declining. Deliver is 16% down. That doesn't look good. Cayenne down. Men down. 911. Okay. Growing Panamera terribly down. Tyon 718 what's that down outlook for some improvements some better margins but net cash flow margins very very bad capital allocations some dividend investments peaking in 2026 but then again they will have to do a new strategy not the 35 something new because things are coming so fast and then these legacy companies not to forget have the pension committ statements and things like that. It looks ugly. Then you say the market cap is 20 billion. 75% of that is from Volkswagen, which means 15 billion. So Volkswagen is practically trading at just 30 billion market cap if they would spin out Porsche or like that. But then again, 8% decline in sales and we are not even in recession. Only now interest rates have started climbing. that will affect global car sales higher rates and that has only just started. So outlook turning negative from a positive that's ugly not miracles with the net cash flows range between three and six that doesn't tell me much will it be three will it be six but okay sorry we are subsidized with this but we didn't do much good terrible results in China some situation in Europe is still okay this might also turn because Europe still is doing good uh Everything feels good. A lot of Germans this year on their holidays in Croatia. The highway has been full the whole summer. Crazy. But when it comes to cars, those will be the new tech legacy will have issues. BMW, the white propeller in a blue sky, as they were forbidden to make planes anymore. They turned to cars. Rethinking for the next hundred years. You have to rethink it every 3 years. what will be next? Okay, they are doing there. But if I calculate again declining, declining a lot of financial liabilities that will look ugly as the interest rates go from zero or one to a more healthy 5% for Europe. This will destroy European car companies. They can simply not survive with such normal fair financial costs. strong dividend and buybacks, yes, but that's declining. And who knows, maybe it will go up. You can always make some money on these car stocks here and there, but the long-term trend is clear. How will they turn everything around? How will they create great returns on capital beats me? Another company that I discussed I discussed it here said it's bad then it doubled then everybody was sending me emails how stupid I am and now we are here they are selling their inventory everything looks great but profits going down low free cash flows and inventory actually is going up that's not good that means that demand is not there even if they make it look like it is The outlook ugly again promises for improvements down the road. And yes, if it improves, this can easily double. This was a $40 stock. Now it's a five. That's insane. Financial targets always those same targets growing margins free cash flow up 6 billion. If this gets to 6 billion free cash flow, that's a 50% yield on the current market cap. That's a price to free cash flow of two if that happens. We have been there. It might happen. The stock might double, the stock might triple. But with these cars that remind me of when Top Gear said, "We're going to make terrible cars for Pejo and selling this with uh washing machine powder or things like that. Maybe it will work but so much competition the technology simply you're getting destroyed by the Chinese competition as this was a nice comment Xiaomi free EV car or groundbreaking and superbly designed their AI is very good as well only thing they haven't go is the hardware integration like BYD but mind you they're designing their own chips as well and then we have this BYD's 34,000 SUVs. Is there anything else I have to say? It is ugly, especially in Europe, but not ugly enough. Give it a recession on top of it and then it will be perhaps really ugly. If we can then nail the survival, you can make some money. But this is not a long-term positive investing tailwind that Warren Buffett says you can invest in and then even make mistakes. huge competition like phones. Where does your phone come from? You might be surprised, but if you have an Apple, it comes from China. The conclusion, no mode. You might get the bounce. Stellantis will go bust in the next 10 to 15 years or some Chinese company will buy it. Low to no investment returns for investing in stocks. Yes, as I said, it might rebound. If it goes to 15, that's a 3x. If something happens in the next 12 months, okay, if interest rates go down, if sales improve, if something somehow improve, there is a free X. That's possible. However, if you look at Volkswagen, despite the financial subsidies from the European Central Bank that worked great, where all of Europe was buying German cars with free money for the ECB from 2007, the return was just the dividend with the all the shocks in between. And that was in the best times for the automotive industry in Europe since like ever. No mode, old legacy simply can't compete. Tariffs, yes, that can help for a while, but that's just a temporary block. Maybe you can make some money, but for me, it isn't worth it. And in a recession, I'll give you copper stocks where we triple, quintuple our money for sure, not car stocks. So, practically, I would say uninvestable. But when you say uninvestable, that makes it actually interesting for value investors. Somebody will make money, somebody can make money. But I prefer nicer ways, simpler ways to make money. That's about