Lithia Motors (LAD) was Impacted by Tariffs

Appalaches Capital, an investment management firm, released its first quarter 2025 investor letter. A copy of the letter can be downloaded here. Appalaches Core LO ended the quarter with a loss of 0.5% after all fees and expenses compared to the S&P 500’s decline of 4.3%, the equal-weighted S&P 500’s loss of 0.6%, and the SOFR Index return of 1.1% in the 1st quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Appalaches Capital highlighted stocks such as Lithia Motors, Inc. (NYSE:LAD). Lithia Motors, Inc. (NYSE:LAD) is an automotive retailer that operates through Vehicle Operations and Financing Operations segments.  The one-month return of Lithia Motors, Inc. (NYSE:LAD) was 7.74%, and its shares gained 20.55% of their value over the last 52 weeks. On June 3, 2025, Lithia Motors, Inc. (NYSE:LAD) stock closed at $320.08 per share, with a market capitalization of $8.332 billion.

Appalaches Capital stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q1 2025 investor letter:

“Lithia Motors, Inc. (NYSE:LAD), being an automotive dealership group, will almost certainly be affected by the tariffs. Lithia’s dealerships import most of their new vehicle inventory from all around the world, depending on the location of the OEM’s factory for each model. As a consequence, new car MSRPs will have to rise to counteract the tax imposed on the imported value of the vehicle. This will decrease the affordability of new vehicles, likely leading to a reduction in the quantity demanded. As a further consequence, it is very probable that demand will shift to the used car market. Just as we saw in 2020 and 2021, the used car market can be very profitable for dealers when new car availability is low. Lithia’s parts and service business should also see more activity if consumers choose to put off new car purchases and instead 3 maintain their aging vehicles. While Lithia has sold off on policy shock, today’s valuation seems to be adequate compensation for the balance of the risks and potential rewards.”

A customer in a store, examining a new vehicle on the showroom floor.

Lithia Motors, Inc. (NYSE:LAD) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held Lithia Motors, Inc. (NYSE:LAD) at the end of the first quarter, which was 45 in the previous quarter. Lithia Motors, Inc. (NYSE:LAD) reported revenue of $9.2 billion in Q1 2025, reflecting a 7% increase from Q1 2024. While we acknowledge the potential of Lithia Motors, Inc. (NYSE:LAD) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Lithia Motors, Inc. (NYSE:LAD) and shared billionaire David Abrams’ stock picks with huge upside potential. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.