I’m a relatively cautious investor but I’ve just taken a punt on a bombed-out UK stock that I think is about to turn the corner. If I’m right, I expect index-thrashing gains, given that it’s crashed 96% in five years. If I’m wrong, well, it’s going to hurt.
The company in question is James Bond car maker Aston Martin Lagonda (LSE: AML). Experienced investors will no doubt be thinking ‘there goes another sucker’ and I totally get that. Aston Martin makes sleek luxury cars but as an investment it’s been a wheezing old banger.
And not just lately but for most of its history, which stretches all the way back to 1913. Aston Martin has gone bankrupt seven times since then, and we can never say never again.
Can the Aston Martin share price finally rev up?
I don’t normally take big risks like this but I want to add a bit of pep to my portfolio. Also, I’m not investing more than I can afford to lose (although I’d rather not lose it). I’ve been watching the stock for years so what made me finally click the Buy button?
I was encouraged by the group’s half-year results, published on 24 July, which suggested that brighter days could lie ahead.
Aston Martin’s revenues actually fell 11% to £603m as wholesale volumes dropped 32% to 1,998 units. And while the group still posted a £233m profit, that was down 1% year on year. However, it’s in the middle of a transition, as it prepares to move on to its Vantage luxury supercar and upgraded DBX707 models.
The board remains confident of hitting full-year targets predicting a big second-half recovery, with volumes, profits and margins all set to rise.
Also, it’s been getting more money for the cars it did sell in Q1, with average selling prices up 29% to £274,000. Despite the troubles afflicting the US and China, there are still enough wealthy supercar buyers out there. They’ve been snapping up Aston Martin Specials and enhanced personalisation options.
James Bond isn’t enough
I’m not the only one taking a risk. Adrian Hallmark has just been appointed Aston Martin’s fourth CEO in four years, after a highly successful stint at Bentley Motors. That puts my gamble into perspective.
Hallmark’s biggest challenge may be to survive executive chairman Lawrence Stroll, who’s not the type to take a back seat. He also has to make its delayed transition to electric motors. Aston Martin has set aside £2bn for that. Its first plug-in hybrid, the Valhalla, won’t arrive until next year.
Investing in cars is a capital intensive in business, and Aston Martin doesn’t have deep pockets or a big company backing it. Net debt stood at £1.19bn on 30 June. Like any Bond movie, this is a race against time.
I’m not the only one tempted. The Aston Martin share price is up 15.6% in the last month, although it’s still down 43.75% over one year.
I accept that I’m taking a huge risk, and have my airbag at the ready. Now let’s hope Aston Martin delivers that strong second-half, then really starts motoring.
