By The Sizemore Letter<\/u><\/p>\n
After one of the best market days this year on Thursday, my recommendation of Daimler<\/b> (<\/span>DDAIF<\/a>)<\/span> in the Best Stocks of 2013<\/a><\/strong> contest finally popped above the 50% mark for the first time this year, including dividends.<\/p>\n For a stodgy, old German automaker, that\u2019s not a bad return at all.\u00a0 It\u2019s proof that you don\u2019t necessarily have to take wild risks or dabble in illiquid microcaps in order to generate high returns.\u00a0 Buying an undervalued blue chip at the right price can deliver attractive returns\u2026without the heartburn.<\/p>\n Of course, the key words here are \u201cat the right price.\u201d\u00a0 Daimler has been able to deliver market-crushing returns this year because it entered 2013 trading at 8 times earnings and sporting a dividend yield north of 5%.\u00a0\u00a0 But this barely scratches the surface.\u00a0 When I recommended<\/a> Daimler back in January, it had \u20ac46 billion in cash and short-term investments\u2026against a market cap of just \u20ac44.\u00a0 The cash in the bank was worth more than the entire company!<\/p>\n All of that is great.\u00a0 But what about now?\u00a0 Is Daimler still a buy?<\/p>\n Absolutely.<\/p>\n I should be clear that I do not expect the next three quarters to give us comparable returns.\u00a0 We\u2019re not getting the crisis pricing we enjoyed a year ago.\u00a0 But I do expect Daimler to at least match the S&P 500 and probably outperform it by at least a small margin.\u00a0 Let\u2019s take a look at the numbers.<\/p>\n Trading at 1.6 times book value, 0.54 times sales and 9 times earnings, Daimler cannot be considered expensive.\u00a0 It\u2019s broadly in line with the valuation given General Motors <\/b>(GM)<\/a>.<\/p>\n Yes, these are cyclical stocks, and the \u201cE\u201d part of the P\/E ratio has a way of being volatile.\u00a0 And yes, the company just announced its best sales month in history in September, based on strong demand from China and the United States.\u00a0 But earnings would hardly appear to be near a cyclical peak given that Europe is only now emerging from recession.<\/p>\n And on this side of the Pond, Daimler is actively mulling expansion<\/a> in the United States.\u00a0 The company is already bumping up against capacity constraints at its Tuscaloosa, Alabama plant.\u00a0 This follows plans to set up a new plant outside of Sao Paulo, Brazil as well.<\/p>\n All of this expansion spending will probably take a toll on margins in the coming 1-3 years.\u00a0 But I would consider that a high-quality problem!<\/p>\n Will Daimler take the crown in this year\u2019s Best Stocks contest?\u00a0 That remains to be seen, and we still have two and a half months left in 2013.\u00a0 Anything can happen.\u00a0 But I continue to recommend Daimler in growth portfolios and highly recommend buying it on any dips.<\/p>\n Charles Lewis Sizemore, CFA, is the editor of the\u00a0Sizemore Investment Letter<\/a>\u00a0and the chief investment officer of investments firm Sizemore Capital Management. As of this writing, he was long DDAIF.\u00a0Click here<\/a>\u00a0to learn about his top 5 global investing trends and get your copy of \u201cThe Top 5 Million Dollar Trends of 2013.\u201d\u00a0<\/em><\/p>\n This article first appeared on InvestorPlace<\/a>.<\/p>\n This article first appeared on Sizemore Insights as Daimler Firing on All Cylinders\u2014And it’s Not Too Late to Buy<\/a><\/p>\n