Thursday, August 5, 2010

Buy Whats Working- Auto Parts Stores

Although the stock market is much higher than its recessionary lows of March 2009, the economy has yet to really follow suit.  The unemployment rate maybe off its recent high of 10.6%, but it still sits at 9.6%- far from good.  For this reason, the auto parts stores have done extremely well the past couple of years.  This is for two main reasons.  First, the consumer is now starting to fix their own vehicles.  Car owners can save a lot of money by performing simple tasks, like changing the oil, as compared with taking the car into a service center.  Second, people cannot afford to purchase a new or better used car; so, they are forced to continually fix their broken down cars.  I do not see this trend ending anytime soon.  Even if the unemployment rate turns around, people will still continue to do the DIY work because they saw how much money they saved.  There is a reason that all auto parts stores' stock prices are near a 52 week high.  The consumer is not totally dead, they are just being very selective on how and where they spend their money.  In my opinion, the consumer will continue to buy from the auto parts stores as a way to save money.

My favorite plays are AutoZone (AZO), O'Reilly Automotive (ORLY), and Advanced Auto Parts (AAP). 

Company Symbol Stock Price 52 wk Range
AutoZone AZO 205.76 135.13-213.65
O'Reilly Automotive ORLY 47.75 33.61-51.70
Advanced Auto Parts AAP 53.36 36.11-55.78


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