carimmohelp: Mercedes-Benz vs BMW: Who will win the battle of giants?

Mercedes-Benz vs BMW: Who will win the battle of giants?

30 January 05:11 AM

The main mistake made by most beginning traders and investors when buying stocks is that they invest in all major brands and "blue chips" they can find (Gazprom, Coca-Cola, Toyota etc while being guided by their investment advisors,brokers and other "experts" who make money on trading volume and are interested in making you buy anything.

Can a 20-year old manager of an investment fund be an expert in all markets? Of course not. No wonder that most of the time, it is brokers who benefit from trading stocks, not investors.

Mercedes vs BMW: Which stock is better to invest in?

If you have understood what is stated above (one shouldn't take anybody's word for it when it comes to investing, let's try to compare the stocks of two auto giants and iternal rivals – Mercedes and BMW – to find out which stock is better to invest in? Eugene Olkhovsky, an expert from Masterforex-V Academy will help us.

Mercedes comes 12th in the list of global brands 2011 while BMW is number 15. By the way, Toyota is number 11. It is not accidental that Mercedes, BMW and Audi account for 10-12% of the car markets in the countries with developed economies.

Mercedes-Benz and BMW are some of the most prestigious car brands in the world. The cost of these brands is similar: Mercedes-Benz –$27,445B (+9% as compared with 2010, BMW – $24,554B (+10%. They produce high-quality, safe and luxurious, car. No wonder they are so popular around the globe.
Market capitalization

It is common knowledge that a company's market capitalization reflects its development and state of affairs, thus being a key factor of its future prosperity. The market capitalization of BMW is over€28 (more than the one of general Motors, by the way. Its stock appreciated by 40% in 2011. The stock is among Germany's TOP 30 companies (DAX Index.

The market capitalization of Daimler AG (Mercedes-Benz is its affiliate is much more substantial - €67,4. Its stock appreciated by 30% in 2011.

According to Igor Vasev, Head of the Market Trading Department of Masterforex-V Academy, BMW's stock has already reached the pre-crisis level and is being traded around the top of the current price range.

Technically, the stock looks stronger than the broad market despite multiple problems in the eurozone:

Mercedes-Benz's stock depreciated after the 2008 financial crisis. It has failed to recover up to the pre-crisis level so far. It seems like the company has some major problems as its stock looks weaker than the broad market.

After the rapid downfall in August 2011 Daimler AG's stock consolidated in the price range between €30 and €37 per share. However, investors do not give up hope and keep purchasing the asset even amid low market activity. As a result, the price has come close to the top of the range. The market reaction to this level (€37 will reveal the intension of big-scale investors: a break and consolidation above it will suggest a further rally while a rebound will continue the flattish pattern.

Sales volume

As long as the global auto market keeps seeing an increase in the sales of premium cars (luxury vehicles, both Mercedes-Benz and BMW are consolidating their positions around the world. As for the "race" of the 2 motor giants, BMW is the frontrunner in terms of sales.

In 2011 Mercedes-Benz sold 1.25 autos, which is a 7.6% increase as opposed to 2010. The demand was especially high in Russia (+70%, China (+50%, India and Taiwan (+40-45%. After 40 years of dominating the premium sector of the global car market, Daimler AG is not going to take it lying down. The company is planning to increase its sales up to 1.5 million autos in 2015.

Unlike Mercedes, BMW sold as much as 1.6M autos in 2011, which is a 14.5% sales increase, the highest in history. The demand was especially high in China(+40%, Russia (+38,8% and the USA (+14,6%.

Therefore, BMW outpaced Mercedes-Benz in terms of car sales. Audi comes next with its 19% sales increase in 2011.

Which company is richer?

Profitability is not a trivial issue, especially for investors. In early 2011 both the companies showed a tremendous start: Daimler AG doubled its income in Q1 2011 as opposed to Q1 2010, BMW quadrupled its income. BMW's proceeds in Q1 reached €16B, while Mercedes-Benz's proceeds were equal to €13,9B. Daimler AG's turnover in 2011 reached €97,8B, its net income hit €2,5B. BMW's turnover in 2011 reached $53B, its net income increased up to €2,35B amid a 24% net income increase.

Which one is more creative?

A lot of car owners and experts around the world consider Mercedes-Benz and BMW to be the etalons of the global motor industry. These brands are seen as the synonyms of high quality and safety. We must confess, both the car manufacturers spend a lot of money to sustain their reputation.

The experts of Masterforex-V Academy have singled out a couple of major factors of their business success:

Time testing. In this term, BMW is far behind Daimler, which started production in 1883. BMW was founded in 1916. The first car was manufactured in 1929. Today it owns 25 plants in 14 countries around the world.

Stability. BWN is the frontrunner in this race. According to DJSI, BMW has been recognized the world's most stable car manufacturer for 7 times in a row.

Responsibility. It is sufficient to say that BMW is one of the very few motor companies that do not use robots to assemble cars. It is done manually to improve safety and to avoid defects.

Innovation. Both BMW and Mercedes-Benz keep investing in innovation, creative design, higher performance and other aspects that allow their cars to be some of the world's best.
In this aspect, today BMW is slightly ahead of Mercedes-Benz. By the way, it was BMW that introduced the anti-block braking system, which later became popular with other motor giants. In 2011 BMW focused on new materials and engines for its cars to make them lighter, safer and more economical.

Safety. Both Mercedes and BMW equip their cars with active and passive safety systems. For example, the new BMW 5 series is considered the safest car in its class. It received multiple awards and became the first car to receive the highest possible rating (100% according to the Euro NCAP crush-test. Now the company is working on auto-pilot systems for its cars.
Comfort. Riding a Mercedes or BMW is always a pleasure, not to mention various heating, airing and massage systems, tons of electronics, on-board computers etc.

Which one is more promising?

Even such giants as BMW and Mercedes-Benz sometimes have problems. During the first week of 2012 their stocks depreciated by 1.1%. If to consider the drawbacks, experts point out the following ones:

•   The manufacturing expenses of Mercedes-Benz are relatively high.
•   Mercedes has no major stockholder to secure it against merger. For example, DMW is supported by the Quandt family (46.7% shares. Deutsche Bank, Kuwait and Abu-Dhabi own only 20% of Daimler's stock.
•   Mercedes-Benz is currently lagging behind in terms of "environmental friendliness".
•   BMW has recently seen a decline in the demand for its cars throughout the EU.

Both the companies treat problems as hidden opportunities. They are planning to expand production outside Germany, especially in the US, Russia and Asian countries (first of all in China. While 70% of the cars sold by BMW in 2002 were manufactured in Germany, today it is only 58% and is nearing 50/50.
By the way, the expansion of their presence in foreign markets secures the companies against currency market fluctuations and shocks.

As for the companies' prospects, they are planning to introduce next-generation cars in the near future. Moreover, Mercedes is planning to upgrade its E-class while BMW is palling to introduce new crossovers (X2 and X4.
BMW is also planning to expand its production up to 2M cars a year by 2020 and to start a new I-series of "green" (environmentally friendly cars.
Mercedes-Benz is expanding investments in hi-tech and innovation technologies.
Both the companies strive to make their cars as economical as possible.

The bottom line: Despite some problems, both Mercedes and BMW are stable in many aspects. They keep expanding production while their income is growing. The competition between them is not over yet.

Market Leader and Masterforex-V Academy would appreciate if you could participate in a survey. Please, visit the Academy's forum for traders and investors and answer the following questions:

Which stock looks more promising to you?

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