Advance Auto Parts (NYSE: AAP) has pulled-back about $4 since first recommended on May 19, 2009 at a price of $43.38, but view that as a Buy opportunity.That's because an argument can be made that auto repair represents one of the best sectors over the next one-two years. Here's why:
The increase in the average U.S. vehicle age, less-than-ideal new conditions for new car purchases, and a recession that's created the era of the 'frugal consumer' all bode well for AAP, for an obvious reason: more Americans will have to keep that used car in-shape because a new one is not their future.
Technically, AAP has dropped below its 50-day moving average, and if that persists it would be a concern; but as of now, it signals a better price to scoop up shares. The First Call FY2009/FY2010 EPS estimates for AAP are $3.05 to $3.44.
Stock Analysis: Advance Auto Parts is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in APP now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your AAP position before December 2009. Sell/Stop Loss if you were to buy shares in this company: $22.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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