Stocks For Dad
TMF Selena's Stock For
Dad
Chrysler <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: C)") else Response.Write("(NYSE: C)") end if %>
1000 Chrysler Dr.
Auburn Hills, MI 48326-2766
(810) 576 -
5741
Company
Snapshot
Hey, Pop!
Thanks for the dozen toothbrushes and the 32 jars of spaghetti sauce! The
warehouse club must have had another great sale, eh? (In the future, you
can keep some of this stuff for you and mom -- I can't go through it all
that quickly.)
I know you asked me for a stock idea recently and I've been wracking my brain
trying to think of one for you, for Father's Day. And here's my best shot.
To thank you for all you do, here's a stock for you!
You know how you plunked down a lot of money for your shiny new Camry? Well,
that got me thinking. Perhaps you'd be better off investing in a solid automobile
company than in some of the wacky other companies that occasionally draw
my interest. Since Toyota is a foreign company, which Fools generally steer
clear of, I thought of Chrysler.
Here's what we're hoping for: One thing I'm excited about is that after taking
a look at Chrysler's stock chart, I noted that it's entering a definite
push-me-pull-you phase, marked by the wide-brimmed-Easter-hat formation.
Since Ford's chart shows a wheelbarrow formation and GM's reflects the flight
of a bumblebee, this is... Hey -- that's not very Foolish analysis. Let's
stick to some more fundamental numbers.
One number is pretty much guaranteed -- a 4.90% dividend. That's right --
by buying Chrysler at current levels, you're signing up for nearly 5% per
year in dividends. Not too shabby. (Chrysler upped its dividend in December
-- the seventh increase in the past three years.) If Chrysler were among
the 30 Dow stocks, it would be in the select Dow Dividend group of stocks.
Applying the Dow Dividend system to the S&P 500 yields Chrysler as the
number-one stock. (You can read more about the
"Beating the S&P" Approach in the
Foolish Workshop and in the
"Beating
the Dow" message folder.)
Chrysler recorded revenues of nearly $60 billion in 1996, with earnings of
$3.7 billion -- a 6.3% profit margin, compared with 3.0% for Ford and 3.1%
for General Motors in the same period. The company is committed to buying
back billions of dollars of stock.
According to Market Guide, while
the industry return on equity is about 23.8%, Chrysler's is 32.5%. Chrysler's
3-year sales growth is 12.1%, compared to the industry's 9.4%. 3-year dividend
growth is 62.7% (vs. 31.5%), while earnings growth lags the industry, at
14.2% (vs. 25.7%).
And in case you need one more number to get you thinking about Chrysler --
a fellow Armenian, Kirk Kerkorian, owns 14% of the company.
Here's what to look out for: Investments in automobile companies warrant
a mention of the usual dangers:
-- Labor strife, factory downtime, lost revenues.
-- Economic downturns, when people put off major purchases like cars.
-- Automobiles being replaced by hovercrafts.
-- Occasional iguana infestation at factories, reducing production.
Of course, there's a lot more to consider. So get out your notebook and pencil,
Dad, and look into this company. Maybe it's the right one for you. And by
the way...
Happy Father's Day!
Love,
Selena
Next Article, TMF
DotCom's Stock For Dad, Cisco Systems |