Used Car Week & Stock Market Sentiment
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This week we’re going to cover some of the stocks in the auto industry given I’ve talked about Advance Auto Parts in recent months and the fact that I attended Used Car Week in Scottsdale a few days this week. My friend Lucky Lopez of Automotive Life and Loanbridge was in town for the event as well and for those that have been here for a while we met a few years back in 2022 when I shorted Carvana.
One of my edges is recognizing themes in the markets then diving into that theme as much as I can to understand the industry as best as I possibly can. For example, in 2011-12 the desk I was on was short for profit colleges so I was able to learn the inner workings of how the model worked which was key for them to survive. So, whether we buy quality companies in a turnaround or companies with increasing margins and FCF, understanding the story is key.
That’s important for some of what we do in managing capital; build a portfolio of 6-10 positions that are thematic (fundamentals/turnarounds) so we can get capital to work and let those ideas work anywhere from 3-18 months. Sometimes, that takes the deep dive and a theme and last week I discussed the potential for two themes next year to play out here.
This week there is a new one (have been tracking for a while) is the auto industry and certain companies within it and one of those is ACV Auctions. I took a position last week and heard the CEO speak this week. Given some of the data I’ve looked at this arena might be another theme to track for 2025 as well.
Some of these positions that make it in the portfolios may hit targets faster than others and some (like Boeing) take time and that is an important part for potential investment partners to understand; not just our approach to research and ideas but also how we build out portfolios to generate returns.
This week we’ll talk about:
- Broad Market Update
- Charts (NFLX/Gold/Coin)
- ACV & A Few Others in The Auto Space
- Weekly Q&A
Now on Spotify
The Broad Market: Stock Market Sentiment
The markets are on cruise control into end of year at this point in my view so there’s not too much to get into here this week but let’s dive in a bit.
*Look at SPY/QQQ/IWM/NFLX/Gold Futures and energy charts.
M&A is going to pick up next year with deregulation and Lina Khan out (discussed this last week here in “The Wealth Boom”
Bitcoin and Crypto is running – I owned a lot back in the day, sold most of it. Not what we do today but with some of the equity linked names it makes for decent tactical trades long/short.
Gensler is out at the SEC next year and the markets like this. Click that article to read a quick piece from Barrons – we can look at a few correlated charts with COIN/Mara/Riot among others.
Early delinquent auto loans (blue) increased to 8.1% in third quarter, while seriously delinquent loans (orange) increased to 2.9%. For those in the business (and I spoke to many this week at the conference) they believe this is a bigger deal than most want to discuss.
This is a video from Lucky Lopez of Automotive Life and of Loanbridge. He’s a friend I met on YT a few years ago and was at the conference this week and has been a wealth of knowledge for me in the auto space.
Both of those are really good videos to get you up to speed on some of the loans and what is going on in less than 20 minutes. He’s an industry veteran and can explain it much better than me (and did explain it to me) so have a watch.
ACV Auctions
Before I start this section, none of this is investment advice and I currently own this position for portfolios. This was the Company who I saw speak at Used Auto Week – the CEO had a great personal story and the Company itself has a great background on how it was IPO’d.
Quick story: They are an online car auction Company that (industry
notes) came alive during Covid due to their online auction process for dealers. Instead of shipping the cars to say a Mannheim or a Cox Automotive it’s done on the dealer lot and uploaded which saves shipping fees and time.
They run 4 business arms: The Auction, ACV Transportation, ACV Capital, Clear Car Brand (sourcing)
Let’s get into some quick bullet points:
- Record breaking revenue growth: $171 million which is a +44% increase YoY.
- A +32 surge in vehicle sales – 198K units sold in Q3
- Upward revision in guidance for full year revenues with 2025 projections at $809 million which is a significant increase
- Expanding into new markets with two planned acquisitions (and more down the road)
- Tailwinds coming from auto loan crisis likely
- Barrons piece: Carvana Rival is a Coiled Spring
Final Word.
- Issue 47 Out Sunday only 2 Left for 2025
- Market on Autopilot into Year End
- Eye on Auto Loans & Tightening
- Q&A
Next Lesson
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About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital Management L.L.C., a multi-strategy investment management firm based in San Juan, Puerto Rico. He has over 10 years of experience in the financial industry, specializing in equities, futures, and event-driven trading strategies.
He is also the founder of TheLongVol.com, a blog and newsletter that shares his insights on his investing process, travel, and other private investments. He has been featured in Bloomberg, Arizona Business Journal, Business Insider, Yahoo! Finance, Forbes, Seeking Alpha, and other publications over his career on Wall Street.
