As Americans Flock To Used Cars, Small Cap Value Stocks See Rise

While many people stayed home throughout the course of the pandemic, more and more drivers are returning to the roads, leading to a surge in used car sales and a benefit to some small-cap value stocks, reports The Wall Street Journal.

Americans currently are car-shopping in near-record numbers, which, along with the computer-chip shortage, has driven the prices of used cars sky-high. Used car prices were up 34% in June over the same time last year.

Dealerships are reaping the rewards of increased demand, as seen with dealership giant AutoNation (AN).

“Demand continues to outpace supply for new vehicles. We expect this to continue into 2022 due to consumers’ preference for personal transportation coupled with lower interest rates,” AutoNation CEO Mike Jackson told Yahoo! Finance.

AutoNation recently reported earnings that entirely overshot economists’ estimates. Net sales were $6.98 billion versus an anticipated $6.07 billion, with diluted earnings per share (EPS) at $4.38 versus an anticipated $2.58.

AutoNation’s stock is currently up 112.4% for the past year, a meteoric rise seen by many such value stocks over the past several months.

Finding the Value in Small Caps with AVUV

With the economy in full-on recovery mode, U.S. small-cap value stocks stand to benefit significantly, as increased spending flows into various consumer-oriented industries. AutoNation is one such small-cap value company.

American Century Investments, partnering with Avantis Investments, offers the Avantis U.S. Small Cap Value ETF (AVUV), an ETF that invests in companies with low valuation but high profitability ratios.