arb outlook, page-2

If I knew anything about shorting I would be short this stock - in fact since I added it to the watchlist a few months ago I would have made a tidy profit by now had I been short!

I don't actually think the shutdown of car manufacturing will have a big impact because ARB is focused on aftermarket parts. The cars will still be coming into Australia and will still need kitting out. From what I understand ARB largely engineer and make their own stuff anyway so they won't be overly reliant on the parts providers that are predicted to go out of business as a result of the closures. But if they are relying on businesses that supply to the car industry (it would be more the raw materials suppliers rather than the component makers) then I think the market will self-adjust to continue to be able to supply them.

A much bigger impact IMO will be the end of the wave of mining investment in 2015/2016, especially considering mines are still closing in the eastern states coal industry.

ARB will take a big hit there IMO, and unless their overseas sales growth takes up the slack their earnings growth will drop. They have been impressive up to now but obviously impressive growth tends to be unsustainable and I think they've hit that limit. And the stock was already priced for growth so that leaves potentially a lot of room to fall.

I am not worried about the long-term future of the company, their make good, quality gear and I see it everywhere. They are getting a good reputation in the US too - a couple of American friends have asked me about it. Overseas is where the future lies, the US is massive market and they've all got trucks.

But in the shorter term they have been priced for growth with a low div yield when the evidence suggests their earnings are at risk of decline - that should lead to a correction in share price.

All just IMO, of course.