Morningstar

Dependable Buick Remains Underappreciated

Dependable Buick Remains Underappreciated
Securities In This Article
General Motors Co
(GM)

David Whiston: Buick is another brand with product that may be flying under Americans' radar screens. This is a brand that has done extremely well in the JD Power vehicle dependability study, never finishing worse than fifth in the past five years. This is a study that measures problems per 100 vehicles over three years of ownership after you buy it new. In fact, in the 2018 poll released this week Buick was number three overall and the number one mass market brand according to JD Power (though to me it's really more of a premium brand between mass market and volume or luxury). This brand consistently beats Toyota and the German three premium brands in dependability.

This isn't the brand of your parents' or grandparents' Park Avenue. This is refined, understated, luxury brand relative to Cadillac for those that want something better than a Chevrolet. Buick sold over 1.4 million vehicles in 2017 globally with about 1.2 million of that in China, but I think there's potential for the brand to grow more in the U.S. The Enclave large crossover just got a new generation late last year and attracts buyers in their mid-40s, about a decade younger than the typical new vehicle buyer. Remember GM makes nearly $2 billion a year in equity income from its joint ventures, and nearly all of that comes from China, and those are cash earnings. China has the world's largest auto market by a mile now.

Two new models are the Regal TourX and Regal GS. The TourX goes after, in my opinion, the niche of Subaru, Volvo buyers while the GS is a performance sedan with a hard to find naturally aspirated V-6 engine rather than an in-line turbo-4 with 310 horses starting at just under $40,000.

Buick is one of the many underappreciated things about the new GM and one of the many reasons the stock is still a best idea.

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About the Author

David Whiston, CFA, CPA, CFE

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist, AM Industrials, for Morningstar*. He covers stocks in the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007. He writes stock reports, ad hoc reports, stock analyst notes, and builds discounted cash flow models for each company covered. He also assesses their economic moat and makes frequent television and print media appearances in local, national, and international news outlets. Key stocks covered include GM, Ford, CarMax, and all six publicly traded franchise auto dealers, such as AutoNation and Penske Automotive Group.

Before joining Morningstar in 2007, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence, gaining experience around assessing an asset’s cash flow.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond’s Robins School of Business. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner.

In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011 .

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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