The Hidden Winner of the Chip Shortage
The demand for semiconductor chips continues to outpace supply.
These chips are used in pretty much everything you can think of — from smartphones and washing machines to toasters and toothbrushes.
So, from big corporations to small businesses, this problem is affecting all aspects of manufacturing.
And as the world reopens, the shortage is adding more pressure to all sorts of markets. But one industry is feeling the pain more than others…
3 Headlines for the Week:
The Car Market Is in a Pinch
Takeaway: Carmakers rely on chips for everything from the computers powering engines to driver assistance systems. So, the shortage is forcing them to leave out higher-end features, like navigation systems and blind-spot detection, from cars that would normally have them.
Some companies have gone a step further, slashing vehicle production entirely. Ford, Volkswagen and Jaguar Land Rover have shut down factories and laid off workers.
Industry experts believe the impact of the chip shortage will likely last for a few more years. And the government isn’t doing much to help…
Takeaway: Last Thursday, Commerce Secretary Gina Raimondo met with executives from tech firms, chip suppliers and companies impacted by the shortage, like Ford.
Raimondo acknowledged that the auto industry is “really struggling” right now. But she also said she doesn’t believe carmakers should get any special treatment. And representatives from other industries agree.
Auto leaders plan to keep lobbying the government. But the problem still remains: There aren’t enough new cars on the lots to keep up with consumer demand right now. And buyers are turning to used cars in droves…
No. 3: Used-Car Sales Are Soaring
Takeaway: Shoppers are now having trouble finding new vehicles with the colors and higher-end features they want. So, they’re turning to used cars instead … which has driven up prices.
Research firm JD Power reported that used-car prices have hit an all-time high. In normal times, lightly used vehicles — ones that are a couple of years old with low mileage — usually sell for about 65% to 70% of their original price. Now, they’re going for 75% to 80% of original sticker prices.
But this is great news for used-car companies…
1 Way to Profit:
Used-Car Retailers Benefit … You Can, Too
The country’s largest used-car retailer, CarMax Inc. (NYSE: KMX), is reaping the benefits of skyrocketing used-car prices.
What sets it apart from most competitors is its customer-friendly, zero-pressure sales environment.
And Alpha Investor founder and Wall Street legend Charles Mizrahi saw that the company also had unbeatable scale with an omnichannel approach. It sells cars in-store, online or a combination of the two.
That’s why he added CarMax’s stock to the model portfolio in May 2019. And since then, it’s up over 50%. Now, it’s currently above Charles’ buy-up-to price. So, we don’t recommend you buy into it today.
But if you’ve already joined Charles in Alpha Investor and bought into CarMax, congratulations on your gains! And keep an eye on your inbox next week…
In his next monthly issue, Charles is revealing another great Alpha company that will benefit from this surge in demand in the used-car market. If you get in early, you could see potential triple-digit gains in the years ahead.
And even if you haven’t joined Charles yet, don’t worry. You still have the opportunity to do so today. Check out how right here.
1 Question for You:
Have You Bought or Sold a Car Recently?
Are you one of the thousands of Americans who bought or sold a car in this market?
Maybe you or someone you know have experienced long lines or trouble finding the car you wanted. Let us know how your used-car experience went by writing to us at AmericanInvestor@BanyanHill.com.
Senior Managing Editor, American Investor Today