Both Volkswagen AG (ADR) (OTCMKTS:VLKAY) and Bayerische Motoren Werke AG (FRA:BMW) have held historically higher margins. Both companies have been spending money to increase their Asian and emerging-market presence. Coupled with weak profits at home, those margins suffer a short-term hit.
The second point is a matter of relative valuation. All three companies are relatively inexpensive (General Motors Company (NYSE:GM) the cheapest, but without some of the high quality fundamentals) but have tremendous opportunity for emerging market growth — hence the heavy spending abroad. This creates an opportunity of buying domestic company prices, already on the low end, with the promise of emerging-market growth. Typically, investors would have to pay growth prices for growth stocks — but that’s certainly not the case with these three companies.
All three warrant further investigation. At a glance, however, Volkswagen AG (ADR) (OTCMKTS:VLKAY) might be the most compelling pick of the three, with the Pink Sheets stock trading down nearly 13% since the beginning of 2013. Volkswagen AG (ADR) (OTCMKTS:VLKAY)’s lines are top-notch, and the company will be able to improve operations, both foreign and domestic, in the near future.
If you believe that European auto sales can’t drop much further than the current lows, then its time to do some large-cap bargain-hunting.
The article Euro Auto Sales Hit Multi-Decade Low. Time to Buy? originally appeared on Fool.com is written by Michael Lewis.
Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends General Motors.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.