Consider O'Reilly Automotive, due to the used car repair trend

Posted Sep 16th 2009 5:40PM by Joseph Lazzaro
Filed under: Stocks to Buy

In the current market frugal consumer plays carry the day. And that's why I'm reiterating my Buy rating for O'Reilly Automotive (NASDAQ: ORLY), first recommended on May 18, 2009 at a price of $37.02.

Nothing creative about the O'Reilly's value story: it's the third largest automotive aftermarket parts supplier (alternators, starters, fuel pumps, brake shoes, pads, filters etc.), with 3,285 stores in 38 states.

Nothing creative about O'Reilly's value story: it's the third largest automotive aftermarket parts supplier (alternators, starters, fuel pumps, brake shoes, pads, filters etc.), with 3,285 stores in 38 states.

Auto parts companies usually do well during downturns because -- you guessed it -- people who can't afford to buy a new car maintain their current used car better, because they know they may be driving it for several more years. In the U.S., it's an enormous market – and a critical one, if fewer decision to buy new cars. The First Call FY2009/FY2010 EPS estimates for ORLY are $2.13 to $2.52.

Stock Analysis: O'Reilly Automotive is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in ORLY now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your ORLY position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $18.

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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.

Tags: ORLY