Income shares
Are ALD and APE WORTH BUYING with the recent pullback ? Richard
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Answer
Hi Richard,
Two stocks exposed to cars. We’re not keen on Eagers at the moment, given their recent update. They talked to weakening consumer trends in vehicle purchases, which is obviously reflected in the share price. That is a known known, so palatable. What we couldn’t reconcile in their update was around their profit guidance, it seems like something else is also at play with profit likely to be materially lower. For now, we are not interested in APE. As for Ampol (ALD), we think the outlook for EV’s will reduce the value of service stations. They rely heavily on foot traffic to sell other stuff, and our lingering concern is that less foot traffic, as EV’s can essentially be ‘fueled up’ at home, will continue to have a negative impact on the sector which will need to reinvent itself. We have recently bought the pullback in SmartGroup (SIQ) which is exposed to trends in cars – we think that’s a better a way of playing the weakness and therefore value that emerged in this area.
