AutoNation Inc. has a market cap of $4.88 billion; its shares were traded at around $33.5 with a P/E ratio of 17.82 and P/S ratio of 0.39. AutoNation Inc. had an annual average earnings growth of 3.9% over the past 10 years.
Gates began purchasing the stock in the first quarter of 2008 at about $15 per share, then continued adding shares as the price went down to about $8 that year. He added shares several more times in 2009, bringing his total holding to 10,792,100 shares, which he has held since the fourth quarter of 2009. The sells he made this month were between 2.7% and 11% of his total holding.
Gates bought the stock when the company’s car sales and other metrics were declining. From 2006 to year-end 2007, the company’s revenue fell 4.1%, as new car sales fell 6.4%. The company was hardest hit by decreased sales in California and Florida, which together represented 50% of its new vehicle business. Business worsened in 2008, when the company’s revenue dropped almost 23% from 2009. At that time, Eddie Lampert’s ESL Investments owned 45% of its common stock.
Through Eddie Lampert’s firm, ESL Investments, he has invested in AutoNation since before 2001. A press release from Oct. 30, 2001 announced that he had purchased an additional 27 million shares of AutoNation at $10 per share, bringing his total holding to 77 million shares, or 24% of the company’s outstanding stock. As of Nov. 8, 2011, he owns 60,072,613 shares. He sold 392,544 shares in the third quarter at $37 per share and sold almost 2% of his stake on October 28.
Lampert has also does well with his large, long-term investment in AutoZone (AZO), which has risen 19% year to date and 183% over the last five years.
In the most recent third quarter, AutoNation’s revenue increased 7%, driven primarily by higher new and used vehicle average selling prices. New vehicle same-store sales decreased 2% and sales were flat overall, being negatively affected by the limited availability of Japanese manufactured vehicles due to the earthquake and tsunami. Income was up across all three of the company’s segments – Domestic, Import and Premium Luxury.
AutoNation does not pay a dividend, but it repurchased 7.2 million shares from July 1, 2011 to Oct. 19, 2011, for an aggregate purchase price of $247.7 million. The board of directors announced on Oct. 20 that it increased its share repurchase authorization by $250 million.
AutoNation’s valuations have been at or near 10-year highs most of the year: