Bayerische Motoren Werke AG (BMW.DE)

It is post-generational. Everybody wants one. They have a great suit of electrics. It is a play on the upper middle class. (Analysts’ target: 97.63).

(A Top Pick March 8/17 - Up 4%) Sold it 6 months ago. Not because he doesn’t like it but more because they wanted to buy something else.

The street hates BMW right now. Many analysts say BMW’s margins are too high and will come down. He says that BMW has sustained its high margins for a long time. Also, BMW is very strong in diesel and there is a perception that diesel is dirty. The Volkswagen scandal did not help. BMW and Mercedes put filters on that reduce particulate emissions significantly, so they are being tainted with an inappropriate brush. Opportunities for BMW are very good in the US, Europe and China. They build many SUV’s in the US, which will help protect them from Trump. (Analysts’ price target is 96.54€)

(A Top Pick April 19/17. Up 11%.) He still likes this. It’s selling at 11-12X earnings. Has a 4% dividend. They are probably going to sell more electric cars then Tesla this year. Trading at 12X earnings. This should move to €100-110 in the next year or so.

(A Top Pick April 19/17. Up 7%.) A global consumer brand in an auto company and dirt cheap. Selling for about 10X earnings. Very solid. Dividend yield of 4.05%.

BMW or Louis Vuitton as a 1^st time purchase into Europe? He would recommend you be conservative first and get aggressive later. This one is cyclical. It would be better to go into a bank or an insurance company first, and after having made some money, look at other things. Has never owned any of the auto companies, simply because their capital expenditures usually wipe out any free cash flow.

(A Top Pick Aug 4/16. Up 15.69%.) He still likes this. 40% is owned by the Quandt family. Management wants to drive technology and drive their business, and is happy to give up margin in the short term to do that. 4% dividend yield.

(A Top Pick June 16/16. Up 28%.) He still likes this. A great brand name and you are not paying a high multiple for it. Pays a great dividend. The Quandt family owns about 40% of the company, so you have a very strong shareholder. China is doing very well for them. There is pent-up demand in Europe.

(A Top Pick June 16/16. Up 20%.) A great company. QE in the US drove up a lot of purchasing going forward, which was the reason for the great participation in cars. It happened in Europe, but not to the same extent and he thinks that is going to happen. Also, people were really worried about China, but China has done quite well for them. They care about their business, the technology, and everything that goes into it. Management is happy to give up margin, because they have a view of the future, which makes a lot of sense. They don’t do things for the short term, they do things for the long-term.

The auto sector is one of the few areas that is cheap. The world has decided that the auto cycle is over, gasoline powered cars are going to disappear, and therefore we don’t need to own these stocks. This is selling at 8X earnings and it is a global luxury brand. Their entire line-up is higher luxury cars. They will make as many electric vehicles as Tesla this year, and have all of the technology. Highly profitable. The one issue is debt. They have €1 billion of debt on a $50 billion market cap, because all the car leases are still done internally. Dividend yield of 4.5% and has been going up 10% per annum. (Analysts’ price target is €86.)

(A Top Pick March 24/16. Up 13.61%.)

About 40% of the company is owned by the Quandt family, so you have a very stable shareholder. Also, the company has been very good at introducing people to products, like their cars, which is very good from a marketing perspective. The company will give up margin in the short term for longer-term gains. They will spend more on R&D and more on CapX. Car sales in Europe have not been strong compared to Canada and the US, and he sees that as an opportunity. Dividend yield of 3.71%. (Analysts’ price target is euro 88.)

(Top Pick Feb 11/16, Up 34.93%) A great brand. It is a very unique company that is 40% owned by one family in Germany. China continues to do well for them. During QE in the US, the car industry collapsed, and then there was a huge buying spree. In Europe this had not happened yet when he bought it.

(A Top Pick Feb 11/16. Up 34.39%.) About 40% of this is owned by a German family, so it has a very stable ownership base. Also, it has a great brand. They’ve done a very good job on research/development.

Glaxo Smith (GSK-N) or BMW (BMW-GR)? Two entirely different companies. A global drug company and an automobile company. This is clearly going to be more of a cyclical business, tied to the economy. To him, there are better places to look for value.