Pub. 5 Issue 1

23 Issue 1 2019 2 JUNE 28, 2019 THE KERRIGAN AUTO RETAIL INDEX Auto Retailer Stocks Up Sharply in June The Kerrigan Index™ ended June 2019 at 564.25 , shooting up 10.4% for the month and up 31.2% year-to-date, both significantly outperforming the broader US equity markets. The S&P 500 Index increased 6.9% for the month and is up 17.3% year-to-date. All seven of the component stocks were up for the month of June. Sonic Automotive posted the largest increase of +34.0%, followed by Group 1 Automotive (+16.5%), Asbury Automotive Group (+13.0%), Penske Automotive Group (+10.7%), CarMax (+10.4%), AutoNation (+6.3%) and Lithia Motors (+4.1%). Of note in June 2019, CarMax posted an all-time high stock price and both Group 1 Automotive and Asbury Automotive Group posted 52- week highs. Additionally, Sonic Automotive’s market capitalization surpassed $1 billion for the first time since February 2017. Consistent with prior months this year, June 2019 sales declined from last year, down 2.6% for the month. However, overall volume remains strong with the seasonally adjusted annual sales rate (SAAR) at 17.29 million, topping the 17 million mark for the third time in four months and exceeding most industry analyst expectations. Through the first six months of 2019, sales are down 2.4%. Some analysts are predicting a stronger second-half given the launch of new and redesigned light trucks, as well as a possible interest rate cut from the Federal Reserve. Strong consumer confidence, steady economic growth and employment gains, and relatively low gasoline prices continue to support new light vehicle demand, though analysts have noted that affordability is increasingly weighing on the market. Tim Fleming of Kelley Blue Book summarized June this way: “Transaction price growth accelerated in June, climbing 3% as demand for trucks and SUVs pushed sales and prices up in those segments. Overall, SUV prices were up 4% and trucks rose 3%, while car prices were flat (and still lost market share). Luxury and mainstream midsize SUVs are showing the most strength right now, with brand new models such as the BMW X7 and Kia Telluride driving incremental sales and price growth for their brands.” And looking ahead to the second half of the year, Jeff Schuster, head of global vehicle forecasts for LMC Automotive noted, “Despite all of the external noise, the beat goes on! A much more dovish Fed is under pressure and is now expected to make a series of interest rate cuts. This will provide support for auto sales in the second half of the year and help offset rising vehicle prices and the current level of incentives.” While new car sales are down, the used car market has proven much stronger. “The decline in new sales ha s been disappointing, but it’s important not to overlook the effect of growth in the used vehicle market,” said Thomas King of JD Index Monthly Change YTD Change The Kerrigan Index™ +10.4% +31.2% S&P 500 Index +6.9% +17.3% 500 510 520 530 540 550 560 570 June 2019 564.25