By Zach Scheidt
This post BUSTED: 70 Miles Per Hour Down A Mountain appeared first on Daily Reckoning.
“Honey, how fast are we going?”
My wife asked me this as I leaned into a turn on vacation.
Like most of us, I consider myself to be a good driver and I don’t usually respond well to passenger input. But I looked down at the dials and told Brittany we were going an “easy” 70 miles per hour.
We were late for a dinner reservation and I wanted to get to the scenic restaurant before the sun set.
“What’s the speed limit here?”
I knew I was busted. After all, we were driving on a mountainous highway on the Western Canadian coast. The views were spectacular and I was having fun taking the turns a little aggressively.
That’s when I looked up to see a speed limit sign that read 100.
I simply pointed to the sign without mentioning that the limit was in kilometers per hour instead of the miles per hour we are used to in the U.S.
“What is wrong with these people??” was my wife’s incredulous response. It wasn’t until we got to dinner that I fessed up to it.
“We were driving over the speed limit,” I told her. “The sign was in kilometers per hour. But I was just having so much fun driving our rental truck!”
Renting A New Car Has Its Perks
I’ve never bought a brand new car before.
I just don’t believe it’s a wise investment for most people. After all, you can buy a car that is 2 years old for close to half the price, with plenty of useful life left in the vehicle!
But I’ll tell you, after renting a brand new pickup truck for a vacation this summer, I can see why some people are willing to pay up for all of the bells and whistles that come with a brand new car or truck today.
The truck we rented could sense what lane we were in and alerted me if I started to drift left or right.
It had a cruise control feature that automatically slowed down if we were approaching a car in front of us.
And it even had emergency brakes that kicked in if we were about to crash into something ahead. (We got to test that feature out when my wife took a turn driving. Let’s just say I didn’t feel like napping after that encounter.)
The best part was that we had plenty of room for all of my race gear, anything that my wife wanted to go shopping for, and our normal luggage, too.
Now I see why Americans are infatuated with buying new pickup trucks!
Strong Sales Drive Auto Profits Higher
This week, major automakers released their monthly sales reports showing that demand for new vehicles was very strong in August. The U.S. auto industry is on pace to sell about 17 million vehicles this year.1
That’s below the ultimate peak from two years ago, but still a very strong number.
In particular, buyers are paying up for big pickup trucks and SUVs. In fact, about 68% of the cars sold in August fit into this large car category.
It makes sense when you think about it. Consumers have more money to spend thanks to the wealth effect we’ve been talking about here at The Daily Edge. And it’s easy to justify buying a bigger vehicle to fit more cargo, or just for safety or status reasons.
Keep in mind, these bigger cars and trucks carry higher price tags, and they also hand auto companies much higher profits for each unit sold. That’s a big part of why I’m pounding the table when it comes to buying auto stocks like Ford Motor (F) and General Motors (GM).
Granted, both of these stocks have traded lower in recent weeks, thanks to escalating trade tensions with China. Both Ford and GM have a significant portion of their vehicles currently exported abroad.
But at this point, the strength here in the U.S. provides a stable source of revenue for these stocks. The potential for trade resolution gives us a good opportunity to see our investment move sharply higher. And the stock prices are so cheap that you’re getting an incredible value for your investment right now!
Today, I recommend buying shares of both these car companies for the long haul. You’ll enjoy a 6.2% dividend yield from Ford and a 4.1% yield from shares of GM while in time, both of these stocks should move steadily higher thanks to profits from truck and SUV sales.
It’s times like these when smart investors can look carefully at the numbers to pick up cheap stocks. And all of this despite the headlines that are keeping skittish investors from locking in these profits.
Here’s to growing and protecting your wealth!
Zach Scheidt
Editor, The Daily Edge
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1U.S. Auto Sales Maintain Momentum for Now, WSJ
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