In early August, I discussed several potential beneficiaries of a lingering slow economy, including dollar stores, pawn lenders and off-price retailers. Today, I want to extend the analysis to a similar theme: used cars.
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New car sales have been weak now for a few years and are gradually recovering, but this weak economy suggests we'll continue to see cars aging and owners hanging onto their cars longer than they did prior to the Great Recession. Over the past decade, annual sales had been consistently in the 17-18mm units a year before plunging to 9mm and recovering now to approximately 13mm according to government data. Tighter credit and high unemployment are, to my mind, the primary challenges to new car sales.
An obvious beneficiary of such a trend would be used car dealers, but there are several other ways to take advantage of depressed new car sales, including parts retailers and manufacturers. Less obviously, one could consider companies that enable car parts to be recycled - perhaps very interesting due to those companies' limited competition. Here is a list of companies that I believe might benefit from the trend of drivers hanging onto their cars:
Disclosure: Alan Brochstein is currently holding no positions in the securities mentioned in this post.
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