Short Group 1 Automotive: Sohn Investment Idea Contest Entry

Summary

• We believe GPI is a short based on five key factors: aging fleet, bubble in auto loan financing, foreign exchange headwinds, bleak domestic markets; and cash flow instability.
• The decrease in oil prices have led to a temporary increase in demand for petroleum based vehicles, and as a result, there has been an increase in automobile sales.
• However, due to the risk of increasing oil prices in the future, there will be a decrease in the quantity demanded for these vehicles.
• A bubble in auto loan financing, international turmoil, and a heavy debt load will also weigh on the stock.

Short Group 1 Automotive (NYSE:GPI)

Summary

We believe GPI is a short based on five key factors: aging fleet, bubble in auto loan financing, foreign exchange headwinds, bleak domestic markets; and cash flow instability.

The decrease in oil prices have led to a temporary increase in demand for petroleum based vehicles, and as a result, there has been an increase in automobile sales.

However, due to the risk of increasing oil prices in the future, there will be a decrease in the quantity demanded for these vehicles.

A bubble in auto loan financing, international turmoil, and a heavy debt load will also weigh on the stock.

Presentation:

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.