If you want to invest in the auto industry but are concerned that disruption from electric vehicles could threaten your investments, consider Copart (Nasdaq: CPRT). It’s in the business of selling abandoned, destroyed and otherwise salvaged cars and has recently sported a market value of nearly $ 7 billion.
Copart is the kind of business that comes into play at the end of an automobile’s life. By holding auctions primarily of vehicles salvaged from car crashes and making it easier for them to be resold to buyers planning to dismantle such vehicles, Copart doesn’t really care what kind of fuel these (used) cars and trucks run on. It’s about extracting the last piece of value from a dead automobile before it goes to major scrapyard in the sky.
Over the past five years, the company has increased earnings per share by nearly 150%, through a combination of expansion, profitability and share buybacks. During this period, net income increased 121%, while management repurchased nearly 10% of the outstanding shares.
There is probably more growth in the future of Copart. It has expanded its relationships with some of the largest auto insurers in the United States, and the auto salvage business is still ripe for further consolidation, both nationally and in the other 10 countries where the company operates. his activities. Copart’s economies of scale are also an important competitive advantage. (The Motley Fool recommended Copart.)
Ask the fool
Question: What is the difference between mutual funds and mutual funds? – AE, Pueblo, Colorado
A: Mutual fund managers buy and sell stocks, bonds and / or other assets according to a defined investment strategy. Shares are issued and redeemed on demand at a specific price (the ânet asset valueâ) which is calculated at the end of each trading day based on the total market value of the fund’s holdings. The number of shares is not fixed. If many people want to participate, the fund company will issue more shares and have more money to invest.
Open-ended investment trusts (ITUs), on the other hand, typically start with a single public offering and have a relatively fixed portfolio of investments. While holdings in mutual funds can change dramatically over time, holdings in ITU are supposed to be held until the trust is liquidated on a specified date. Investors who wish to trade in ITU shares can usually do so in the secondary market. Unlike a mutual fund, the price of UIT shares in the secondary market may be higher or lower than the net asset value of the trust’s actual holdings. ITUs typically charge a sales fee (or “charge”), while many mutual funds are free of charge.
Question: What happens to a stock’s P / E ratio when the stock splits? – KB, Greenville, North Carolina
A: Splits do not change the price / earnings (P / E) ratios. A company’s P / E ratio is simply its recent stock price divided by annual earnings per share (EPS). A stock traded at $ 40 per share with an EPS of $ 4 will have a P / E of 10 (40 divided by 4). If the stock divides 2 for 1, the stock price will be $ 20 and EPS will also be halved, resulting in an unchanged P / E, because 20 divided by 2 is 10.
My dumbest investment
In the mid-1980s, I had about $ 10,000 to invest and was hesitating between two companies. One was converging technologies. I worked in tech in Silicon Valley and thought I understood the business. This was a turnaround as the once rapid growth of the company was stalled due to parts shortages and management issues, among others, and it was posting losses. A former Hewlett-Packard executive was recruited, which was promising. I bet on Convergent.
The other company was a small startup called Amgen. If I had instead bought Amgen at the time, it is very unlikely that I would still own the shares. But if I had, that $ 10,000 investment would have been worth over $ 12 million today.
I revive the numbers every few years to stay grounded. (And yes, masochistically!) Now when I look at Amgen’s share price, I get lost in “what if” thoughts. There are several huge, important basic lessons in this story. – PK, San JosÃ©, California
The madman replies: There is of course. But don’t be too hard on yourself. One lesson is that while the hindsight may be 20/20, you couldn’t know Amgen’s future back then.
Investing in struggling companies and hoping they will bounce back can be risky. You can reduce risk while still performing well by sticking to healthy, growing businesses that aren’t overvalued.