Cramer also took an interest in the performance of shares of CarMax and AutoNation, two competing car dealers with totally divergent stock paths.
Since the start of 2018, shares of CarMax have gained 17 percent, beating the S&P 500’s performance, but AutoNation’s stock has sunk 7 percent.
“They’re both big auto dealership chains with hundreds of locations, they both sell new and used vehicles, so how the heck has the stock of CarMax been able to leave the stock of AutoNation in the dust?” Cramer wondered.
The answer boiled down to their businesses. While the two companies look similar on the surface, they are differently structured, with CarMax focusing primarily on used cars and AutoNation raking in twice as much revenue from new cars as used ones.
Therefore, as tariffs on steel and aluminum boosted prices on cars and car parts, AutoNation ate those costs while CarMax profited from selling its lower-tax used cars.
“No wonder CarMax is wiping the floor with AutoNation,” the “Mad Money” host said. “The bottom line? At the beginning of the year, I told you to avoid AutoNation’s stock and stick with the better-run, used-car-vehicle heavy CarMax. That’s been a good call, and, if anything, things are looking even better for CarMax here, especially since its stock remains darned cheap, selling for just 15 times next year’s earnings estimates.”
Source : CNBC
