Oakmark Funds: “We Believe Lithia (LAD) Shares are a Bargain Today”

Oakmark Funds, an investment management firm, published its “Oakmark Select Fund” first quarter 2022 investor letter – a copy of which can be seen here.  A decline of 6% was reported by the fund for the first quarter of 2022, compared to the S&P 500 Index, which declined 5% for the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Oakmark Select Fund mentioned Lithia Motors, Inc. (NYSE:LAD) and explained its insights for the company. Founded in 1946, Lithia Motors, Inc. (NYSE:LAD)  is a Medford, Oregon-based automotive dealership group with an $8.5 billion market capitalization. Lithia Motors, Inc. (NYSE:LAD)  delivered a -2.41% return since the beginning of the year, while its 12-month returns are down by -25.16%. The stock closed at $290.01 per share on April 22, 2022.

Here is what Oakmark Select Fund has to say about Lithia Motors, Inc. (NYSE:LAD) in its Q1 2022 investor letter: 

“As is typical during periods of significant volatility, we added a new name to the portfolio. Lithia Motors (NYSE:LAD) is the largest franchised auto dealer group in the United States. The company has a long history of creating shareholder value through best-in-class operations and consistent acquisitions of smaller dealers at attractive returns. There is a long runway for management to continue creating value through such acquisitions. Management believes this will drive earnings per share to more than $50 by 2025, even as car prices return to pre-pandemic levels. Meanwhile, Lithia has a significant opportunity to further accelerate growth through Driveway, its online auto retailing platform. We believe Lithia’s existing nationwide infrastructure provides Driveway with significant competitive advantages in e-commerce, which smaller dealers will struggle to replicate. Driveway is not generating any earnings today, but it could become a major contributor over the next five to seven years. With the stock priced at less than 7x management’s 2025 EPS target and with substantial future growth potential from Driveway, we believe Lithia shares are a bargain today.”

Our calculations show that Lithia Motors, Inc. (NYSE:LAD) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Lithia Motors, Inc. (NYSE:LAD) was in 56 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 64 funds in the previous quarter. Lithia Motors, Inc. (NYSE:LAD) delivered a -5.23% return in the past 3 months.

In April 2022, we published an article that includes Lithia Motors, Inc. (NYSE:LAD) in Top 5 Stock Picks of Value Investor David Abrams. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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