Continental AG: A Speculative Buy

Continental AG: A Speculative Buy
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Summary The stock price has fallen nearly 50% because of one-time factors and the threat of US import tariffs on European autos. The stock should rally if US tariffs aren’t implemented, which is possible if they’re a bargaining chip for agricultural concessions. The price to book value implies that this is the third-best buying opportunity of the last two decades. Continental AG ( OTCPK:CTTAF ) is a high quality German automotive manufacturing company specializing in tires and non-tire rubber products, auto parts, and future automotive technologies like autonomous driving and electric vehicle ecosystems. A confluence of factors involving tariff threats from Trump, a cyclical slowdown in China, and production bottlenecks from EU emission regulations, have caused the stock to fall by almost 50%. The stock is now very cheap compared to its trading history, but the US tariff threat looms large on the horizon. This article makes the argument for a speculative buy, where large gains could be made if US tariffs don’t eventuate. Business overview Continental operates in 554 locations within 61 countries: Source: 2017 Annual Report Its operations have historically been categorized into five segments: Source: 2017 Annual Report From 2020, Continental’s operations will be streamlined into three sectors namely: (1) Continental Rubber, (2) Continental Automotive, and (3) Powertrain. The old segments of Chassis & Safety, and Interior will be rolled into the new Continental Automotive sector with a greater focus on autonomous driving and vehicle networking technologies. The new Powertrain sector will be a separate legal […]

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