When a major news story breaks, stocks react instantly. First derivative stuff might take a little longer, while second and third derivatives sometimes never move at all. If auto sales plummet, GM is going to go down, but what about Goodyear? Or the company that makes robots for assembly plants? Or gas stations? Or highway toll companies? Finding that first, second, or third derivative can be a real way to find value before the market has priced in the news accordingly. BUT, while plotting a logical course from a seismic event is intellectually stimulating, conclusions drawn can often be too far removed for any financial impact.
Sometimes when a news story hits, I feel the obligation to find some moderately intelligent way to benefit from it financially. One story captured my interest recently; Tesla’s inability to sell to consumers directly in New Jersey. I was unaware that dealers are a mandated sales channel so that “consumers don’t get ripped off.” I see the benefit for the dealerships, as they don’t have to compete with a direct competitor who would have significant cost advantages. But I don’t really understand how the dealership structure benefits consumers or the manufacturers. The thought behind the law is that consumers need expert advice on car purchases, but in this day that just seems silly.
This brings me back to the group of car dealerships; PAG, AN, GPI, and ABG. Could Tesla’s push to sell direct-to-consumers affect buying habits of traditional car customers? Are dealerships outdated middlemen, when so much car information is available through other means? Probably.
But laws don’t change quickly and most of their money is still made from repairs. And the fact that I want to dislike a business model, doesn’t mean it’s bad. While doing something that makes sense intellectually can be quite satisfying, it’s not always a great way to make a buck.