The Panic-Proof Portfolio (Stockchase Research)
Goodyear Tire
GT-Q
TOP PICK
Nov 15, 2022
Stockchase Research Editor: Michael O'Reilly As motorists return from the pandemic, this TOP PICK is well positioned as it owns the largest share of the replacement tire market in the US. Its recent acquisition of Cooper Tire will expand its international presence and will immediately be accretive to earnings. It trades at 4x earnings and is under book value presently. We recommend placing a stop loss at $8, looking to achieve $16 -- upside over 40%. Yield 0% (Analysts’ price target is $16.19)
Shares not performing the last year. Is disappoint with results. Expecting more car sales to increase sales. Electric car demand will require tires manufactures. Will watch company very closely going forward. Higher inflation really biting into business margins.
We reiterate GT as a TOP PICK. Recently reported earnings showed revenues up over 6% beating analyst expectations, with the American region leading the way with 12% growth, showing signs that post-pandemic driving is back on the upswing. It trades under book value and at 15x earnings. We like that cash reserves are growing while debt is aggressively retired and stock is bought back. We recommend maintaining the stop at $10, looking to achieve $13 -- upside potential of 23%. Yield 0%
(A Top Pick Apr 27/23, Up 21.4%)Stockchase Research Editor: Michael O'Reilly
Our PAST TOP PICK with GT has achieved its target at $13. To remain disciplined, we recommend covering half the position at this time and trailing up the stop (from $10) to $11.
(A Top Pick Apr 27/23, Up 12.1%)Stockchase Research Editor: Michael O'Reilly
Our PAST TOP PICK with GT has triggered its stop at $12. To remain disciplined, we recommend covering the position at this time. This will result in a net investment gain of 9%, when combined with our previous recommendations.
It's a tough space. We exited this years ago. Buying Cooper Tire 6-8 years ago, but didn't enhance business. The raw material of tires (rubber) is volatile, so this sector is unpredictable. GT is not managed well.
Caters to both EV and combustion markets, but car sales have come down. Tough, super-competitive business. Restructuring, which has gone on for a while, so wait for that to finish. Write-offs during restructuring usually help companies.
It is better now than before but it has lots of debt and negative free cash flow. It has survived over time but has always been somewhat levered and has performed poorly for a long time. Due to the low price it could be time to buy now but you have to be able to handle risk.
Does not like company. Would recommend selling. Last quarter good - but overall - not a high quality company. High debt loads with poor business prospects.
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