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AutoNation's Story Is Good: Does Valuation Matter?

Donald Trump once said that "The best deals are made when no one wants them". AutoNation was a steal last fall when no one wanted it... when everyone was panicked about GM Ford and Chrysler going bankrupt. People thought the reverberations from those three going under would kill AutoNation. Eddie Lampert was buying tens of millions of shares at those prices. Eddie Lampert isn't buying anymore. Insiders have sold large chunks recently. Now is the part where Wall Street upgrades it over and over and sells it to everyone else.

UBS Downgrades AutoNation: A Reason to Ignore Analysts

You are correct in that normally AN should not depend on it's inventory to repay it's current debts(other than repaying floorplan payable of course).... Given the situation though, which is far from normal, i think AN is doing a very good job managing their inventory, and staying profitable as well. Their orders are down significantly, and even though they may have too many hybrids they cannot sell(which is not bad management as i don't know a single person who predicted oil falling from $148 to $30 in 6 months), the reality is, they have too many cars given sales levels, and the remedy for having too many cars is inventory liquidation, which to a large extent, solves the liquidity problem.

The stock on the other hand, has gotten a little ahead of itself, and without some major improvements in the securitization market and in auto sales as well, doesn't make for a good investment beyond where it is.

UBS Downgrades AutoNation: A Reason to Ignore Analysts

$1.5 billion of the AP's are vehicle floorplan, and are not paid until the vehicle is sold. Net out floorplan and AP's are only $140 million.. therefore, i don't think the liquidity problem is as bad as UBS thinks... but, you are correct about Todd.... there is pretty much nothing negative that can be said about Eddie Lampert (including SHLD, AZO, and AN) that Todd Sullivan won't find a way to write an article that disagrees with it..... the truth of the matter is simple.... Todd Sullivan really just wants to get naked with Eddie Lampert

Sears Holdings: Poor Results, As Expected

I read the 10-q and noticed Lampert didn't buy any stock back during Q3 until oct 5th atleast, and then he bought 2.6 million shares between Oct 5th and the end of Nov... Seems he was concerned with liquidity to some extent, and/or excercising patience. Most think he's just blindly burning money on the buyback. I think he's making the best of the situation. At these prices, (less than half of book value), Lampert might as well grab as much float as possible while the stock is dirt cheap. After the float is nearly gone, they can put their existing debt repurchase authorization to good use and buy back the debt at 50 cents on the dollar.

If i were Lampert, i'd lock in today's prices by buying Deep ITM calls dating out for the next year or more, AND begin buying debt in the open market as soon as possible. All this can be financed out of inventory, which needs to be brought down anyways.

As Car Dealerships Disappear, Auto Nation Pulls Through

Todd.

AutoNation's share buyback is limited to roughly 50% of income. Does the GAAP loss of $1+ Billion mean they cannot repurchase shares, or is the restriction in regards to operating income and they voluntarily chose not to repurchase any?

The Changing Model of Auto Dealerships Presents Long Term Investment Opportunity

And what if you want to test drive a car?? How do you do that online?

AutoNation, Sears, and Autozone Getting Closer Together

I agree that the plan is to eventually have AN and SHLD combined, but as an AutoNation shareholder, what worries me is that regardless of how undervalued the shares are today, Sears could take it over with minimal premium. ESL already owns nearly 44% of AN shares. SHLD has the balance sheet to to pay with cash. If Eddie Lampert has control over both entities, he's not going to pay a penny more than necessary to bring the two together.

Bill Gates Helps Out Autonation

Jim,

I am blown away by the latest 13D filing. Looks like Eddie picked up right where he left off, buying right up to the 45 day blackout period prior to earnings, and exactly 3 days following earnings he's buying again, only this time with the lower prices, he's taking down bigger blocks of shares. This is going to get very interesting. As of July 10th, the short interest was 21.6%. Insiders own over 55+% of the shares, and between the company buyback and Eddie's purchases, I don't see how this thing doesn't spike higher.

Is it possible the reason people are selling is because of fears the company will be taken over without a premium?? Other than margin calls or forced selling, thats the only thing I can think of that might motivate someone to sell at these prices. Otherwise this stock is going much, much higher.

Bill Gates Helps Out Autonation

Jim,

Do you think Lampert wants to take AutoNation private, or perhaps fold it into Sears Holdings?

Also, I am surprised that Lampert, or ESL partners have not increased their ownership at these lower prices. Is he restricted from buying around earnings time?

Bill Gates Helps Out Autonation

Find an online calculator that will discount future earnings, plug in $1.20 for AN's earnings this year, discounted by 11% and assume zero growth, EVER again. The intrinsic value of this business is higher than todays prices even assuming it never grows again.