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The Case For The Car Tire

Over the past year car sales have been booming. In order to capitalize on this trend investors have been looking primarily at automotive manufacturers and auto parts stores. An off-shoot of these businesses is the car tire market. Tires are a good that is directly impacted from increasing auto sales and cars on the road. Consumers often do not have a choice when it comes to the purchase of car tires making the industry better positioned to handle slower economies. Tires are an expensive good that needs to be purchased, yet are still not given that much thought. Given the nature of their industry and the current automotive trends, it would make sense that tire manufacturers will continue to see strong and steady results in a mostly bland industry.


One specific company that could benefit is Cie Generale des Etablissements Michelin. Consumers are not often extremely informed when it comes to purchasing tires. Uniformed consumers are more likely to choose familiar brand names when making their purchases, which puts Michelin in a unique position. They posses strong brand value through their marketing and produce a quality product. The company itself is well positioned to continue performing well. It has a proven track record for its operations and has room to increase its yield. The company continues to use its cash to buy back shares as well, purchasing €150 million in the first half of 2016. The company will continue to use its cash for these purposes going forward and combined with its proven record for execution it is a relatively safe investment in a currently volatile market. 

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