Changes to International Tariffs Giving This Stock a Boost
When it comes to buying stocks for long-term investing, the short-term gyrations can be difficult for investors. It’s important from a long-term investing viewpoint to look out onto the horizon over many years, and search for short-term pullbacks and opportunities that might allow attractive entry points.
We are all aware of the troubled situation economically in Europe; however, there are still potential opportunities for buying stocks that could benefit from significant market changes when it comes to long-term investing.
One example is the automobile industry. While no one would suggest that Europe is a strong sector for growth in automobiles, don’t discount the carmakers when considering buying stocks. Volkswagen AG (OTC/VLKAY) is continuing to set the foundation for growth globally over the next decade.
The company’s Audi division is continuing to make inroads in many markets, including India, China, and the U.S. Additionally, a decrease in tariffs for many countries is now opening the door for European automobile makers to gain market share.
South Korea recently dropped the import duty on European vehicles from eight percent to only 3.2%, which has resulted in an increase of foreign automobiles making up 41% of the South Korean market versus 28% just two years ago. (Source: Kim, R., “BMWs Cheaper Than Hyundais in Korea as Tariffs Crumble,” Bloomberg, May 15, 2013, accessed May 15, 2013.)
The U.S. has also cut tariffs for imported cars substantially and will completely eliminate them by 2016. This will open the door for competition, and vehicles such as Audis, which are of premium quality, have the potential to gain market share.
Volkswagen is continuing its expansion in emerging markets, as it is investing $1.95 billion in a new manufacturing plant in China set to begin production in 2016. Over the next few years, Volkswagen plans to build 10 additional manufacturing plants around the world, with seven in China.
Long-term investing is not about reacting to month-to-month news; it is about focusing on buying stocks that have the potential to grow revenue significantly over time. More companies are becoming global in scope, and just because a certain region of the world is in economic difficulty does not mean that one should avoid buying stocks from a country there.
Most analysts and investors have already written off any possibility of growth in the automobile sector for Europe, which means that the share price incorporates this view. At some point, the bottom will be reached and there will come a time of growth. Although, markets such as China are crucial for long-term investing—buying stocks with low expectations and significant potential for upside surprises can be a successful strategy.
When developing a long-term investing roadmap, there will certainly be bumps along the way. Buying stocks that have a plan for continued growth is one way to increase the probability of long-term investing success.
This Article Changes to International Tariffs Giving This Stock a Boost was originally published at Investment Contrarians
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