4. Lithia Motors, Inc. (NYSE:LAD)
Brave Warrior Capital’s Stake Value: $272,419,000
Percentage of Brave Warrior Capital’s 13F Portfolio: 9.35%
Number of Hedge Fund Holders: 40
Lithia Motors, Inc. (NYSE:LAD), a supplier of personal transportation solutions in the United States, ranks fourth on the list of top 10 stock picks of Glenn Greenberg’s Brave Warrior Capital. However, hedge funds sentiment reduced for Lithia Motors, Inc. (NYSE:LAD). At the close of Q2 2022, Insider Monkey found 40 hedge funds long Lithia Motors, Inc. (NYSE:LAD), down from 46 funds in the previous quarter.
Abrams Capital Management is the leading shareholder of Lithia Motors, Inc. (NYSE:LAD), with 2.35 million shares worth over $646.10 million. Next on the list is Glenn Greenberg’s Brave Warrior Capital. The hedge fund purchased an additional 106,194 shares of Lithia Motors, Inc. (NYSE:LAD) in the second quarter of 2022, increasing its stake by about 12%. At the end of the June quarter, the hedge fund held 991,301 shares of Lithia Motors, Inc. (NYSE:LAD), worth about $272.42 million, representing 9.35% of its portfolio.
On July 15, JPMorgan analyst Rajat Gupta maintained an ‘Overweight’ rating on the shares while cutting his price objective for Lithia Motors, Inc. (NYSE:LAD) to $325 from $380. Gupta predicted that franchise auto dealership performance would likely be characterized in the second quarter by low new vehicle unit sales and low used vehicle volumes, with only a small amount of relief coming from ongoing price increases on both new and used car sales.
Here is what Oakmark Funds had 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…. (Click to read the full text).”
