Auto dealerships attractive plays: Siris

NEW YORK (Reuters) - As the competitive woes facing U.S. auto makers such as General Motors Corp. (GM.N: Quote, Profile, Research, Stock Buzz) dominate Wall Street's views on the industry, investors may be losing sight of the benefits of owning shares of auto dealers.

Auto dealer stocks are among the most attractive investments as companies such as Sonic Automotive Inc. (SAH.N: Quote, Profile, Research, Stock Buzz) benefit from a stream of repeat customers, Peter Siris, managing director of Guerrilla Capital Management LLC told the Reuters Investment Outlook 2007 Summit in New York on Tuesday.

The dealerships benefit from buyers' tendency to return to dealers to service their cars, Siris said.

"My favorite group of stocks are the automobile dealers," he said. He called Sonic Automotive "a great, great company."

Sonic, based in Charlotte, North Carolina, is the nation's third-biggest publicly traded auto dealer, behind United Auto Group Inc. UAG.N and top-ranked AutoNation Inc. (AN.N: Quote, Profile, Research, Stock Buzz), whose biggest shareholders include hedge fund manager Edward Lampert's ESL Investments.

"There are billionaires making a lot of money and analysts who don't understand the industry," said Siris.

Year-to-date, shares of Sonic and United Auto have narrowly tracked their sector's broadest measure, the S&P auto retail index .6GSPAUTR, which is up 26 percent and has outperformed the broader S&P 500 index, which is up 12 percent.

On the year, Sonic shares are up 30 percent, United Auto shares are up 24 percent, while shares of AutoNation are off 5 percent.

Typical dealerships, in addition to selling both new and used vehicles, sell replacement parts and offer vehicle maintenance.