BMW is the Car Sector's Top Pick

The global car industry is often offputting for investors, but firms like BMW and Ferrari have managed to maintain competitive advantages

Richard Hilgert 26 January, 2018 | 1:01PM David Whiston, CFA, CPA, CFE
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BMW i8

Investors often shun the automotive industry for ideas because of its highly competitive nature and steep capital costs. However, there are competitive advantages – or moats – in the sector if one knows where to look, particularly among suppliers that boast solid brand intangible assets such as Italy’s Ferrari (RACE). The absence of a moat does not rule a stock out as an actionable idea: Morningstar equity analysts think no-moat Volkswagen (VOW) offers compelling value despite the diesel emissions scandal. Narrow-moat BMW (BMW) also looks cheap.

We forecast 2018 global light vehicle demand to increase by 1%-3%: the European recovery will continue with a 2%-4% increase, and India demand will rise by a robust 9%-11% in 2018. But China demand growth will slow in 2018 to 1%-3% as a consumption tax hike on small engine passenger vehicles takes effect.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Bayerische Motoren Werke AG81.35 EUR0.00
Daimler AG71.36 EUR0.00Rating
Ferrari NV216.39 USD0.00Rating
Tesla Inc759.49 USD0.00Rating
Volkswagen AG268.60 EUR0.00Rating

About Author

Richard Hilgert  Richard Hilgert is a securities analyst on the Industrials Team.

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