It is still not clear how much Berkshire Hathaway Inc. (NYSE:BRK.B) paid for the new wheels that Warren Buffet purchased, in the form of an auto dealership group, Van Tuyl, and neither is it certain how many more wheels does Buffet have in his mind, for a smooth ride. Brian Sponheimer, who is an auto analyst at Gabelli & Company, and CNBC’s Phil Lebeau tried to narrow down these two issues on CNBC.
Warren Buffet has not been very forthcoming about the level that Berkshire Hathaway Inc. (NYSE:BRK.B), who he is the CEO of, valued their new acquisition at. Sponheimer, did some back of the paper calculations to reveal this mystery. He comapred Berkshire Hathaway Inc. (NYSE:BRK.B)’s latest addition to its portfolio with AutoNation, Inc.(NYSE:AN), which has a market cap of about $6.34 billion and its revenues for the fiscal year 2013 stood at about $17.5 billion.
” […] Van Tuyl Group is certainly, the dealership is about $8 billion in revenue. Rule of thumb is that $1 buys about $4.5 or between $4 and $5 in sales so roughly speaking $2 billion for this and that compares favourably with AutoNation, Inc.(NYSE:AN), nations largest auto dealership which is publicly traded […],” said Sponheimer.
While it is clear that Berkshire Hathaway Inc. (NYSE:BRK.B) will expand its presence in the auto industry, it is hard to say which dealerships it will particularly focus on. Lebeau based this delimma on the fragmented natue of the industry and explained the arduous task that Berkshire Hathaway Inc. (NYSE:BRK.B) has ahead of itself, in terms of finding the gems in a significantly populated industry.
” […] You have got about 17,000 dealerships out there and the large chains, they only control about 9-10% so you have got about 15,000 of these, a good chunk of those 15,000 are independent or not part of a big chain […],” explained Lebeau.
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