The Misfits: Lithia Motors (LAD)
Reports of the auto dealership's demise are greatly exaggerated.
Gas, Edward Hopper, 1940, oil on canvas (Museum of Modern Art)
One of the investing themes I have struggled to comprehend fully is the idea of disruption supplanting established players. There are plenty of examples of this happening, and one of the most common phrases reminds us about avoiding disruption (“don’t be the last buggy whip maker”).
What I think many people overlook with this concept is the ability of established players in a given industry to adapt and fend off new entrants.
Automotive dealerships are very much an industry in disruption’s crosshairs. Between Tesla’s no-dealership sales model and a slew of online-only car sales companies like Carvana, it would seem that the automotive dealership’s days are numbered.
Don’t say that to Lithia Motors, though. Not only has the company been one of the best investments over the past 15 years, it appears to be adapting to the changing landscape of automotive retail, which could make it the go-to option for online car buying.
Let’s dig in…
Shoutout to Koyfin for their data and charts, without which much of the research for this piece wouldn’t be possible. Sign up for Koyfin here and receive 10% off.
