NEW YORK (TheStreet) -- Warren Buffett is renowned far and wide for his investing prowess, and each of his moves is carefully scrutinized by the media and investors.
Last October, Buffett announced that his Berkshire Hathaway (BRK.A - Get Report) would acquire the Van Tuyl Group, the largest privately-held car dealership chain in the U.S. The company subsequently renamed the group Berkshire Hathaway Automotive.
Buffett's auto dealership is now one of the largest dealership groups in America with over $9 billion in revenue. The group has 81 independently operated dealerships with over 100 franchises in 10 states, including Arizona, California, Florida, Georgia, Illinois, Indiana, Missouri, Nebraska, New Mexico, and Texas.
At the time of the acquisition announcement, Buffett told CNBC that he expected to use it as a means to buy other dealerships. "We will hear, I predict, from hundreds of dealerships in the next year," he said.
That same day, AutoNation (AN - Get Report) CEO Mike Jackson offered his congratulations to Buffett on the deal via an email to CNBC. Jackson had appeared on Squawk Box earlier that day prior to the deal's announcement and wrote "Welcome to the retail auto business" after hearing about the deal.
Jackson also commented in the email on the possibility that Buffett could acquire AutoNation and noted the billionaire investor's relationship with Bill Gates. "As you know, Bill Gates is a 15% shareholder in AutoNation and I'm sure the two discussed the business," he said.
Jackson did not say, however, if he would be open to a deal with Buffett should the Oracle of Omaha pursue one.
In response to Jackson's comments, Buffett said the CEO is a smart businessman who has built a great company. "I watch him every time he's on...and Bill [Gates] has made a lot of money on it," he said.
But Buffett also said the possibility of an AutoNation acquisition was slim. "I don't think we'll be buying [AutoNation]. I know he won't buy us out. We'll probably be both buying more dealerships," he said.
But should Buffett have bought AutoNation, or even another car retailer such as CarMax (KMX - Get Report)? Let's take a look at how these two stocks have performed since October 2, 2014, when Buffett announced the Van Tuyl Group acquisition.
AutoNation grew 18.3% in that time period without dividends, while CarMax grew 42.89%. Furthermore, AutoNation's adjusted closing price grew to $61.60 from $52.07, while CarMax's climbed to $65.80 from $46.05.
So if Buffett bought CarMax on the same date he announced the Van Tuyl Group acquisition, he would have paid a lower price per share than he would have for AutoNation and would have owned a company that had greater growth during the aforementioned period.
The two companies also posted new records in their most recent quarters. AutoNation announced record fourth-quarter and full-year earnings from continuing operations of $1.02 and $3.49, respectively. In its third quarter, CarMax reported record EPS of 60 cents.
If you're considering investing in either of these stocks, here is some high-level analysts, compliments of TheStreet's Research Team:
John Reese commented on AutoNation and CarMax in a recent post on RealMoney.com. Here is what Reese had to say about the stocks:
The American automobile industry is moving along with pedal-to-the-metal speed. Automotive News, based on research by Kelley Blue Book, reports retail auto sales in the U.S. in 2015 should reach 13.9 million, up from 13.5 million in 2014. Transaction prices will average about $33,500, a nearly $700 increase from 2014's $32,804.
J.D. Power and Associates, as reported by CNBC, expects retail sales of new cars and trucks at U.S. auto dealerships to climb to 13.83 million in 2015, which would set a new record, besting 2004's 13.80 million, the current record holder.
Used-vehicle sales should also do relatively well. The National Automobile Dealers Association, though expecting used-vehicle prices to decline 2% to 2.5% in 2015, expects volume to increase a strong 8%.
When investors consider the auto industry, their focus is typically on the major automakers. But to buy a car requires the services of a dealer. Several auto dealers present a strong investment opportunity at this time.
CarMax is a major used-car dealer known for its no-haggle pricing strategy. Buyers pay the listed price and the company's sales people earn the same commission, no matter which vehicle is bought or its price. CarMax operates more than 140 stores across the country.
AutoNation calls itself "the largest pure-play automotive retail company in America." It earns more than half its sales from new vehicles, and has a competitive advantage stemming from its economies of scale.
Asbury Automotive Group (ABG) has 77 retail stores that carry 29 automobile brands, making it the fifth-largest public automotive retailer in the country, says the company. About 85% of sales are from foreign brands, with a heavy emphasis on luxury autos, which helps it during economic downturns.
Consider adding any of these auto dealers to your portfolio. High performers all, they are well thought of by my James P. O'Shaughnessy strategy. O'Shaughnessy is a noted Wall Street strategist and fund manager who, in the 1990s, used extensive research to devise an investment strategy that has proven itself over time. I automated this strategy so I could use it as a tool to study virtually any publicly traded company. Today, investors should consider taking a ride with these three auto dealers because each of these companies earns very high grades from the strategy.
All three dealers satisfy every requirement of the strategy, including having sufficiently large market caps, earnings per share that have increased in each of the past five years and a price-to-sales ratio below 1.5, indicating the stock is well priced. Stocks that pass these three hurdles are then judged by their relative strength, a measure of how well a stock has performed vs. the market during the past year. Only the top 50 of all publicly traded stocks earn the O'Shaughnessy strategy's highest grade based on relative strength, and CarMax, AutoNation, and Asbury are part of this elite group.
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