{"id":35108,"date":"2013-01-07T17:39:38","date_gmt":"2013-01-07T22:39:38","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35108"},"modified":"2013-01-07T17:39:38","modified_gmt":"2013-01-07T22:39:38","slug":"daimler-ride-in-style-in-2013","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/07\/daimler-ride-in-style-in-2013\/","title":{"rendered":"Daimler: Ride in Style in 2013"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

This piece orginally appeared on InvestorPlace as Charles Sizemore’s submission for the 10 Best Stocks of 2013<\/a><\/strong> contest.<\/em><\/p>\n

The auto industry is a truly wretched business to be in.\u00a0 You have high labor costs and the constant threat of labor unrest.\u00a0 You have vicious competition among existing competitors.\u00a0 And perhaps worst of all, you have enormous capital expenditure needs coupled to a highly cyclical business that is prone to booms and busts.<\/p>\n

So, you might be surprised to see that Daimler AG (OTC:DDAIF<\/a><\/strong>)\u2014the maker of the iconic Mercedes-Benz\u2014is my recommendation for the InvestorPlace Best Stocks of 2013 contest.<\/p>\n

Normally, I hate the auto sector and would refuse to touch an auto stock.\u00a0 But right now, I believe that Daimler may be one of the best opportunities in the world at its current price.\u00a0 As a cyclical auto stock\u2014and one based in crisis-wracked Europe, no less\u2014Daimler has gotten no love from investors in recent years.\u00a0 But their timidity is our opportunity.<\/p>\n

Whenever I think of Daimler\u2019s flagship brand Mercedes, I will always think of the \u201cIndiana Jones of Finance,\u201d Jim Rogers.\u00a0 In a road trip across six continents chronicled in his book Adventure Capitalist<\/em>, a customized Mercedes was Rogers\u2019 vehicle of choice.\u00a0 Why?\u00a0 Because \u201cevery dictator and mafioso in the world drives a Mercedes\u2026even in countries with no roads to speak of.\u201d<\/em>\u00a0 Rogers knew that if he had car trouble anywhere in the world, he would be able to find a mechanic who could work on a Mercedes.<\/p>\n

Rogers wasn\u2019t joking about that.\u00a0 Mercedes is the<\/em> premier global luxury automobile.\u00a0 And it is a fantastic way to get \u201cbackdoor\u201d exposure to emerging markets, <\/strong>which I expect to enjoy a nice rebound in 2013.\u00a0 Daimler gets well over a third of its sales from emerging markets, with China being a major contributor.\u00a0 China is already the world\u2019s largest consumer of the high-end S-Class, and China accounted for 10 percent of Daimler\u2019s revenues in the first three quarters of 2012\u2014and this despite a marked slowdown in the Chinese economy.<\/p>\n

And Mercedes cars are by no means Daimler\u2019s only product; Daimler is also a world leader in industrial trucks, which make up more than a quarter of revenues.\u00a0 And as you might expect, emerging markets are a major source of demand.\u00a0 Approximately half of Daimler truck sales come from Asia and Latin America.\u00a0 <\/strong><\/p>\n

China appeared to hit bottom in late 2012, and I expect a rebound in Chinese demand to benefit high-end luxury firms in general and high-end autos in particular.\u00a0 Even in a \u201cbad\u201d year (if you can call 7.5% GDP growth in 2012 \u201cbad\u201d) China was a major contributor to Daimler\u2019s success.<\/p>\n

Investors fret that 34 percent of Daimler\u2019s revenues come from Western Europe, where unemployment is high and overall consumer demand is weak.\u00a0 This does not particularly worry me.\u00a0 Daimler\u2019s high-income customers are less at risk of financial distress than the average European, and sales have remained stable throughout the crisis.<\/p>\n

But let\u2019s say I\u2019m being too optimistic about the Eurozone and that the atmosphere of austerity makes a large delayed dent in European sales in 2013.\u00a0 \u00a0Even so, the stock price offers more than a sufficient margin of safety.\u00a0 The shares trade for less than 8 times earnings and yield over 5 percent in dividends.<\/p>\n

Yet none of this tells the full story about how cheap this company is.\u00a0 Daimler trades at accounting book value and for just 0.39 times sales.\u00a0 It also has \u20ac46 billion in cash short-term investments, and receivables\u2014and a market cap of just \u20ac44 billion.\u00a0 Yes, the cash in the bank and receivables are actually worth more than the entire company at current prices.<\/p>\n

Daimler is simply too cheap to pass up.\u00a0 This is the maker of the<\/em> premier global luxury car trading at prices that would suggest the Mayan calendar was correct about the world ending in 2012.<\/p>\n

Action to take: Buy shares of Daimler AG at market<\/strong>.\u00a0 Daimler could easily double in the 12-18 months.\u00a0 And if we\u2019re a little early in getting into this stock, we\u2019re getting paid handsomely to ride out any unexpected volatility.<\/p>\n

Disclosures: Sizemore Capital is long DDAIF.<\/p>\n

Note: Charles Sizemore won the 2011 Investor Place Best Stocks contest<\/a> with a monster 44% return on his recommendation of\u00a0Visa (NYSE:$<\/span>V<\/a>) and was runner up in the\u00a02012 Best Stocks contest<\/a> with a 37% return on his recommendation of Turkcell (NYSE: $<\/span>TKC<\/a>).<\/strong><\/em><\/p>\n

The post Daimler: Ride in Style in 2013<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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