Daimler AG (DDAIF)
At the top of the list of auto stocks is German luxury automaker Daimler AG (DDAIF), the maker of the Mercedes Benz.
But even after returning 65% last year, Daimler is surprisingly cheap. It trades for just 10 times earnings and 0.61 times sales, and DDAIF stock sports an attractive 3.4% dividend. Daimler is also surprisingly cash heavy; it has nearly a quarter of its market cap in cash and equivalents.
Daimler has what I would call a “high-quality problem.” It can’t produce cars fast enough to meet surging demand, which is exactly the kind of problem that auto stocks want. At a recent press conference, Daimler CEO Dieter Zetsche commented that “We can hardly produce as many cars as customers are asking for. Our product offensive is really just starting to take off.”
Daimler’s plans are ambitious. Zetsche’s stated goal is to surpass rival BMW (BAMXF) and Audi AG to become the world’s largest luxury automaker by the end of this decade. And part of this plan involve unveiling 18 entirely new models and 12 substantial redesigns.
And for all the talk of a Chinese hard landing, China’s wealthy seem to have no problem affording luxury German autos, which is good news for auto stocks like DDAIF. BMW is expanding two of its factories in China to meet demand there, and Daimler, BMW and Audi have all indicated that the Chinese market remains exceptionally strong.