Analysis: Bayerische Motoren Werke Aktiengesellschaft (BAMXY)

This global automobile maker recently announced that its deliveries of BMW, Mini and Rolls-Royce cars rose 7% in January, to 142,154. Yet the shares currently trade at an undervalued level, providing an attractive opportunity.

Bayerische Motoren Werke Aktiengesellschaft (BAMXY)

from Ian Wyatt’s Million Dollar Portfolio

Annual U.S. auto sales are on track for 16.7 million vehicles in 2015. Right now, Ford stock is trading at 10 times 2015 EPS. Meanwhile, General Motors trades at just 8 times earnings. It’s worth considering that the S&P 500 is trading at around 17 times 2015 earnings. And this means that auto stocks are trading at a steep discount.

Buying Ford or General Motors makes a lot of sense. And value investors could do far worse than buying these two solid companies at a cheap valuation.

But there is another very well known European automaker. Because the stock isn’t listed on the NYSE or Nasdaq, it’s far less familiar to investors. In fact, many institutional investors don’t own the stock due to its listing.

The stock is Bayerische Motoren Werke Aktiengesellschaft (BAMXY). You’re probably familiar with the company by a different and simpler name: BMW.

In the first nine months of 2014, BMW delivered 1.5 million to customers, a 6.5% growth from the same period of 2013.

There are several reasons that I believe BMW is a great investment today.

Profit from the Weak Euro. The value of the U.S. dollar has been rising against the euro. BMW has flexibility to lower prices to attract more customers, putting it in a strong position to profit from the weak euro.

Elevated Auto Sales. We expect that the U.S. auto sales will remain above 16 million units per year for at least the next two years.

Electric Cars. Last year, BMW sold 23,000 electric and hybrid cars. That number is expected to double in 2015. In comparison, Tesla produced roughly 33,000 electric cars last year. But Tesla’s stock is valued at $818,000 per car produced. That compares with BMW’s valuation of $38,500 per car produced.

Cheap Valuation. The stock is trading at a valuation of 11-times 2015 EPS. That valuation is slightly above Ford, and three points higher than General Motors. I think that valuation is well-deserved. The company’s strong position in the electric and hybrid car market puts BMW at a distinct advantage over many other auto companies.

If your broker will allow you to buy BMW shares in Germany (BMW.DE), that’s the best option. The average daily share volume in Germany is 1.6 million. That compares with just 69,000 shares on the OTC market in the U.S. With higher trading volume in Europe, bid-ask spreads are smaller. This means investors will likely get the stock at a superior price on the German stock exchange.

But if you can only buy the stock in the U.S., the OTC will be fine. If you choose this route, it’s highly recommended to use limit orders. This will help you avoid buying your shares at an inflated price.

Ian Wyatt, Ian Wyatt’s Million Dollar Portfolio, www.100kportfolio.com, 802-434-6900, February 6, 2015