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Auto parts giant O'Reilly Automotive (ORLY), first written about here on May 18, 2009, at a price of $37.02, is one of those low-profile companies that shareholders want to remain low-profile. Leave the glitz and pomp to other companies. So long as ORLY produces solid earnings growth, that's all that matters.
And it goes without saying that I still like the shares. The used-car maintenance trend in the United States isn't ending anytime soon. Also, frugal consumers in the U.S. can delay getting maintenance done on their used vehicles for only so long. Critical maintenance must be performed, eventually. Further, the U.S. auto fleet's increasing age provides another tailwind for sales. The First Call FY2009/FY2010 EPS estimates for ORLY are $2.24 to $2.61.
Technically, O'Reilly's shares have meandered at or near $40 for the past two months, but according to my analysis that is a temporary phenomenon, and the shares are attractive at this level.
2010 Outlook: I view O'Reilly as a long-term play, but if investors are looking to sell ORLY within the year, it's probably best to take your profits after it rises to $48 to $49, if it fails to rise above key, psychological resistance at $50.
Stock Analysis: I consider O'Reilly Automotive to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in ORLY now; then another 25% in one month, if U.S. economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my ORLY position before April 2010 and I'd put a sell/stop loss at $18.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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