Why has the Automotive Holdings Group Ltd share price suddenly soared?

What: Shares in leading car dealership Automotive Holdings Group Ltd (ASX:AHG) have soared around 8% on Thursday morning to $4.66, after the company released an announcement to the ASX titled ‘CEO Transition’.

The announcement stated that Chief Executive Officer (CEO) Mr Bronte Howson who has held the top position at Automotive Holdings for over 17 years is set to transition to retirement.

During Mr Howson’s tenure, the share price has increased significantly – up 322% since November 2005 – and has recorded a total shareholder return of 13.7% per annum over the past decade.

Automotive Holdings also announced that stepping in to replace Mr Howson will be Mr John McConnell. Mr McConnell’s most recent role was as Financial Director at UK-based global automotive distributor and retailer Inchcape.

So What: Given the superb performance of the group under Mr Howson’s investors could rightly be wondering why the market has sent the share price higher today.

The answer is likely to be that the market is guessing that a changing of the guard could lead to a reassessment of the group’s underperforming refrigerated transport division which many analysts regard as a distraction from the company’s core competencies.

In other words, this underperforming division could find itself on the chopping block under a new CEO.

Also watching the CEO changes closely will be peer AP Eagers Ltd (ASX: APE) – which sits on the share register with a strategic 19.9% stake.

Now What: Investor attention on this sector is bound to heat up in coming months with the listed automotive dealership space becoming increasingly crowded. In early May MotorCycle Holdings Ltd (ASX: MTO) floated on the ASX, while a potential float of European brand car dealership Autosports Group is also being touted.

Given the large number of small operators in the dealership space, the sector is considered ripe for further consolidation. This should bode well for long-term acquisitive growth amongst the larger players and could make it a sector worth taking a closer look at.

How 1 Man Made 100x His Money After 50

Find out how Warren Buffett drove his portfolio to extraordinary gains... Few know, that as Warren Buffett blew out the candles on his 50th birthday cake, he had just 1% of his current fortune. Think about it: At an age when most give up hope, Buffett was just getting started on the remaining 99% of his fortune. Goes to show you that it's never too late for you to potentially get rich. Which is why we've gathered the strategies we learned from Buffett, distilled them down to 11 simple lessons, and put it in an exclusive report for you to claim. Just click here to learn more about this handy investing guide.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.