My latest new recommendation is Bayerische Motoren Werke Aktiengesellschaft (BMWYY), better known to Americans as Bavarian Motor Works — or simply BMW, notes Mark Skousen, editor of High-Income Alert.

Founded over a century ago and based in Munich, the company manufactures and sells cars, trucks, SUVs and motorcycles under the BMW, MINI and Rolls-Royce brand names. It also operates a financial services division that finances, leases and insures vehicles.

BMW, of course, is one of the world’s most prestigious brand names. The company’s products have a well-deserved reputation for quality and reliability. Annual revenue tops $113 billion. Sales are growing. And management is earning a healthy 15% return on equity.

Yet the stock sits on the bargain basement table. It is 26% below its 52-week high of nearly $38. At current levels, BMW is at a discount to book value, and it sells for less than six times earnings (a five-year low) and 55% of sales, while offering a current yield of 5.6%.

What’s the problem here?  For starters, after years of growth, car sales in the United States have stalled lately. In addition, carmakers must now spend vast sums on technology. Regulators are pushing them toward electric vehicles — while Silicon Valley pushes them toward driverless cars. To top it off, President Trump is threatening tariffs on European cars if a new trade deal isn’t reached soon.

Still, there is plenty of good news here, too. For starters, each of these factors is well known and fully reflected in the current share price.

Also, BMW is already a leader in electric cars. It normally invests around 5% of sales on research and development. Last year, it spent 7%. The result? Sexy new models are loaded with high-tech features. That won’t hurt sales any.

And factor in that the average age of vehicles on U.S. roads just hit an all-time high of 12.1 years. That means there is plenty of pent-up demand here. As for the tariffs, European and American negotiators are already hard at work to prevent them from getting implemented. News here could easily cause these shares to spike higher.

This is a classic value trade: a fine company, facing short-term issues (that are already reflected in the stock and likely to be resolved soon), trading at a dirt-cheap valuation and with a fat yield. So, pick up BMW at market. And use a sell stop of $23.

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