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The U.S. stock market remains highly selective: select the wrong stock, and there's a 30-40% haircut up ahead; select the correct stock, and you're positioned for the recovery with modest downside exposure. And with the above in mind, AutoZone (NYSE: AZO) is worth a review.AutoZone represents a good example of a defensive/growth hybrid -- a rare combination. The defensive aspect is its auto parts business for do-it-yourself auto repair enthusiasts, known as the aftermarket: the recession means more American motorists will perform selected, preventative maintenance themselves. The growth aspect involves AZO's likely addition of 200 new stores to its 4,100-store base.
Another trend in AutoZone's favor: the U.S. auto sector's aging fleet. Americans will buy about nine million new cars in 2009, which means used vehicles will become more important, in fleet percentage terms, and that points to increased auto maintenance -- which is bullish for AZO. Moreover, the U.S.'s frugal consumer trend is likely to continue well beyond 2010, another positive for the auto parts sector. The First Call F2009 / F2010 EPS estimates for AZO are $11.33 / $12.62.
The risks include a surge in new car purchases, particularly in the Southwest and Pacific zones, two major geographic areas for AZO. Based on job growth trends, don't look for that surge in 2009 or 2010.
Stock Analysis: AutoZone is a moderate-risk stock. Consider buying a 25% position in AZO now; then buy another 25% in three months. Under any circumstance, don't buy more than 50% of your AZO position in the first half of 2009. Sell / Stop Loss if you were to buy shares in this company: $115.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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Reader Comments (Page 1 of 1)
3-30-2009 @ 4:22PM
Bret said...
AZ Is a total sh!thole company to work for.
3-30-2009 @ 4:49PM
duke said...
The service at all the Auto Zone stores I have shopped at is terrible. The counter people have a nasty attitude like why are customers in here. They are rude and abrupt in dealing with the public. They are off goofing around in the back room and will not wait on people that are standing in a long line. Auto Zone has a problem and it's training the help they hire and not keeping an eye on those bad attitude employees.