LKQ Corporation : A company that mines value from junk cars

LKQ (NASDAQ : LKQ) buys junk cars and sells parts for repairs. These refurbished parts can cost 25% to 50% less than newly manufactured ones. Insurers have increasingly turned to refurbished parts to reduce their repair costs following collisions. LKQ's vast distribution network, built over 16 years through acquisitions and organic growth, gives it key competitive advantages, like faster delivery times and higher in-stock rates than rivals.

U.S. car sales have rebounded to close to prerecession levels, which will boost the number of newer cars on the road, and those are more likely than old cars to be repaired rather than declared total losses after accidents.

LKQ also has excellent opportunities to expand overseas. In Europe, for example, just 7% of parts used after collisions are alternative parts like the ones LKQ sells, versus 38% in the U.S. Last year, LKQ earned $1.06 a share, and Wall Street expects that number to double by 2016. The stock sells for 19 times this year's earnings forecast of $1.37 a share.


The company has good long term prospects and this makes it a good buy. Long term a target of $35 can be given.

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SENSEX

The S&P BSE Sensex gained as much as 157 points to end at its fresh record closing high of 26,560.15 on Wednesday.

Across-the-board gains were also seen on continued foreign funds inflows amid investors churning portfolios ahead of monthly expiry in equity derivatives tomorrow, say brokers. 

A rally in the Asian markets on upbeat US economic data and easing crude oil price also buoyed market sentiment. 

The prospect of further lashings of liquidity in Europe was taken as a positive for emerging markets and MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.4 per cent to its loftiest since January 2008, Reuters reported. 

Foreign institutional investors reduced the pace of funds flow into Asia in August, but India is still among those countries in the region that received the maximum inflows during the month, an HSBC survey says. 

"China remains the most over-owned market in the region, followed by India," the global brokerage firm said. 

Meanwhile, mutual funds have turned more bullish and bought $8.0 billion worth of Asian equities in the past four weeks (ended August 20) compared with net inflows of $1.1 billion in the previous four weeks, according to EPFR Global. 

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Gold: Declines to a Two-Month Low on Fed Rate Outlook

Gold fell to a two-month low in the longest run of declines since June in London on the outlook for higher U.S. interest rates that strengthened the dollar. Platinum headed for the longest run of losses in 27 years.

Many U.S. policy makers raised the possibility they may boost rates sooner than anticipated, minutes of the Fed’s July meeting showed yesterday. The dollar climbed against 10 major currencies after the minutes, and was little changed after reaching a six-month high today. Futures traders are seeing more chance of rising interest rates by the middle of next year.

Fed Chair Janet Yellen will provide her take on the latest data on labor markets in a speech tomorrow at a meeting of central bankers in Jackson Hole, Wyoming. Gold slid 28 percent last year on expectations U.S. stimulus would be reduced as the economy strengthens. Prices rose 6.6 percent this year, partly as unrest in Ukraine and the Middle East increased haven demand.

The market is still highly sensitive to expectations of what the Fed will do and when. The physical market is still extremely quiet.

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BMW: Highest profitability from car making in three years

Bayerische Motoren Werke AG, the world’s biggest manufacturer of luxury autos, reported its highest profitability from car making in three years as the X5 sport-utility vehicle won customers and demand rose in China.

Second-quarter earnings before interest and taxes at the auto unit widened to 11.7 percent of sales from 9.6 percent a year earlier, Munich-based BMW said today in a statement. The margin was the highest since the third quarter of 2011 and beat figures of 9.9 percent at Audi AG, the world’s second-largest maker of premium cars, and 7.9 percent at Daimler AG (DAI)’s Mercedes-Benz Cars unit.

BMW, which reiterated a 2014 forecast today of a significant increase in pretax profit, is introducing 16 new or refreshed models this year to win customers and fend off efforts by Volkswagen AG’s Audi and the Mercedes brand to take the global premium-car sales lead by 2020. First-half sales of the full-size X5 jumped 30 percent, while the up-market 5-Series sedan won 7.6 percent more buyers.

BMW plans to deliver more than 2 million vehicles in 2014, including the Mini small-car and Rolls-Royce ultra-luxury marques, reaching an annual sales target two years ahead of schedule. First-half group deliveries rose 6.9 percent to 1.03 million cars, including a 10 percent jump at the BMW brand. Including the Mini nameplate, the car maker’s Chinese sales surged 23 percent in mainland China in the period.

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EU & US Impose Sanctions on Russia

Russia responded angrily on Saturday to additional sanctions imposed by EU, mentioning that they would hamper cooperation on security issues and undermine the fight against terrorism and organized crime.

EU reached an agreement on Friday to impose economic sanctions for the first time on Russia, over its behavior in Ukraine. Also, it imposed travel bans and asset freezes on the chiefs of Russia's FSB security service and foreign intelligence service and a number of other top Russian officials

Russia Foreign minister mentioned that, the sanctions is a direct evidence that EU countries have set the stage for scaling down cooperation with Russia over the issues of international and regional security. This includes fight against the proliferation of weapon of mass destruction, terrorism, organized crime and other new challenges and dangers

Important to note, US and other western countries accuse the separatists of downing the plane MH17 with a surface-to-air missile supplied by Russia. Although, the separatists deny shooting down the plane and Russia says it has provided no such weapon. US & EU cleverly calibrated and mutually agreed on measures which are certainly pressurizing towards and willing to have a serious talk with Russia 

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RBS First-Half Profit Doubles.

The stock jumped as much as 15 percent, its biggest intraday gain since October 2011.

Royal Bank of Scotland Group Plc (RBS) said pretax profit almost doubled in the first half and forecast that it will meet a target to cut costs by 1 billion pounds ($1.7 billion) in 2014. 

Pretax profit at Britain’s largest state-owned lender may have increased to 2.65 billion pounds from 1.37 billion pounds a year earlier, RBS said in a statement today. Operating profit probably jumped to 2.6 billion pounds from 708 million pounds, according to the results, which were released a week early.

Impairment losses slumped 1.88 billion pounds to 269 million pounds, according to the statement. At its bad bank, RBS reported lower provisions following the sale of assets at more favorable prices. The bank made additional provisions of 150 million pounds for wrongly sold payment-protection insurance and 100 million pounds for interest-rate swaps.

“The results we are posting today show the steady progress we are making as we take the steps to be a much simpler, smaller and fairer bank,” the CEO said in the statement. 

These results show that underneath all the noise and huge restructuring of recent years, RBS is a fundamentally stronger bank that can deliver good results for customers and shareholders.

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India’s Rupee Rises as Monsoon Revival Tempers Inflation

India’s rupee strengthened the most in more than a week as a pickup in seasonal rainfall tempered concern inflation will accelerate. The deficit in the June-September monsoon, which accounts for more than 70 percent of India’s annual rainfall, has narrowed to 27 percent of the 50-year average, the weather department said yesterday. The gap was 43 percent on July 11.

Gains in India’s consumer-price index slowed to 7.31 percent in June, the least since the gauge was introduced in January 2012. The rupee climbed 0.1 percent to 60.1875 per dollar as of

10:30 a.m. on 22nd of July in Mumbai. That’s the biggest gain since July 11. The yield on the 8.83% sovereign notes due November 2023 was little changed at 8.69 percent, according to the Reserve Bank of India’s trading system. That’s the lowest since July 4.

A revival in monsoon rains would be seen as a positive. The rupee is likely to remain range-bound as the RBI seeks to keep the currency stable. The rupee also gained amid increased capital inflows. Global investors have pumped more than $4 billion into the nation’s bonds and stocks this month as Prime Minister Narendra Modi’s government unveiled plans to narrow the budget deficit and allow more foreign investment in industries.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 27 basis points, or 0.27 percentage point, to 5.97 percent in Mumbai. Three-month offshore non-deliverable forwards on the rupee rose 0.1 percent to 60.94 per dollar. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in the greenback.

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