BMW

"I always say, the way a man treats his car is how he treats himself."
--Inspector Tarconi (The Transporter)

Don't think I've ever owned an automotive stock--at least w.r.t. the car makers. From where I sit the most attractive operator is BMW. In the US, BMW trades as BAMXY on the pink sheets.

Some analysts are out recommending the stock, as it is off its highs and has fallen in sympathy with the Volkswagen debacle.

Despite the recent price decline, the security still seems significantly overvalued. About $50 billion market cap expands to at least $80 billion in enterprise value once cash vs debt taken into account. The company has generated negative free cash flow for the past three operating years. Maybe $2-3 billion in annual FCF prior to that. If capitalized as a perpetuity, then this amount of FCF is well below current enterprise value.

Stated differently, from a valuation standpoint, either FCF needs to go up or price needs to come down.

Technically, the multi-year uptrend has been broken. Stock currently trades near a 38% Fibo retracement of its 2009-2015 price range, with monthly stochastics ready to hook at the bottom, which may make it ripe for a trade.

As an investment, seems more interesting near the 62% retracement area ($20 share price) as it coincides with other lines of support and a price more commensurate with fundamental value.

no positions