This column was originally published on RealMoney on Oct. 16 at 10:25 a.m. EDT. It's being republished as a bonus for TheStreet.com readers.I came across Asbury Automotive Group ( ABG - Get Report) a couple of months ago when the car retailer began paying a 20-cent quarterly dividend. The 3.5% yield is about twice what the average S&P 500 company offers and can be comfortably covered 2.4 times with the $1.88 a share in earnings that analysts expect Asbury to deliver for the full year. The stock was then effectively placed on the back burner of my mind until the company posted better-than-expected preliminary earnings last Thursday. At $22.92, Asbury is now up about 40% on the year, and trading at an all-time high. In relation, its larger competitors AutoNation ( AN - Get Report) and CarMax ( KMX - Get Report) are down 4% and up 59% year to date, respectively. While the sector as a whole seems to be catching a bid, it appears that Asbury's key advantage is that it primarily sells import brands like Honda, Nissan, Mercedes and BMW. These cars continue to gain market share with U.S. consumers from the Big Three, though it's also worth noting that 58% of gross profit, came from its service/parts business in 2005. Despite the recent rally, I believe that Asbury shares could trade up through the mid-$20's by the end of the year. The stock is currently valued at just 12.2 times expected 2006 earnings, and the company is on track to grow profits another 8% next year.
TheStreet’s Fundamentals of Investing Course will teach you the keys to making the right decisions in any market.
TheStreet’s Personal Finance Essentials Course will teach you money management basics and investing strategies to help you avoid major financial pitfalls.
TheStreet Courses offers dedicated classes designed to improve your investing skills, stock market knowledge and money management capabilities.
More from Investing
Beyond Pricey? Our Reporters Try the Beyond Meat Burger, Talk Business Model
Is Beyond Meat's burger enough to convince investors to invest in the company? TheStreet conducted a taste test to see what the hype is about.
Kass: 3 Spots of Vulnerability I Would Avoid in This Market
I suggest avoiding all three over the next few months and over the remainder of the year.
Avoid JD Even When Investors Return to Pick Over China Stocks
JD's valuation is too stretched and the stock offers no upside potential, though its first-quarter improvements may seem appealing.
Legg Mason to Cut 120 Jobs as Reality Bites With Activist Peltz on Board
An announcement on job cuts comes just days after legendary corporate raider Nelson Peltz and his investment firm, Trian Fund Management, won two seats on Legg Mason's board of directors.