Author Archives: Scalper1

Auto-parts stores have at least three trends working in their favor. First, low gasoline prices lead people to drive more, and that means more repairs. Second, the age of the average car and light truck is expected to rise to 11.6 years in 2016, according to research firm IHS Automotive. Old also means more repairs. Third, the number of truly old vehicles — 12 years and older — is expected to grow 15% by 2020. Also, currency translation, a problem for many companies now, generally isn’t a problem for the auto-parts chains. The stock market seems to have baked in these realities. During the market pullback, the auto parts group retreated less than the S&P 500. Six weeks ago, the group was No. 33 of 197 groups. As of Wednesday’s IBD, the group was No. 32. Two stocks in the group held up especially well. AutoZone ( AZO ) is only 7% off its prior high. O’Reilly Automotive ( ORLY ) is 11% off its high. The two stocks kept their consolidations fairly shallow, making a breakout from a new pattern possible. At an early December earnings call, AutoZone CEO William Rhodes said the company added 22 net new stores in the U.S. While do-it-yourself remains the chief focus, “Our commercial business continues to gain traction, growing sales 10%, with 55 net new programs open for the quarter,” Rhodes said. As of November, AutoZone had 5,635 stores in the U.S., Puerto Rico, Mexico and Brazil. Among top mutual funds in Q4, Fidelity Contrafund ( FCNTX ) upped its position by 10% and Fidelity Balanced Fund ( FBALX ) jacked up its stake about 122%. Contrafund also cranked up its position in O’Reilly by 6% in Q4. At the Oct. 30 earnings call, CEO Gregory Henslee said the company generated same-store sales of 7.9% in Q3. Earnings grew 25%, the 27th quarter in a row of EPS growth of at least 15%. O’Reilly Automotive expects to add 210 net new stores in 2016. As of Sept. 30, the company had 4,523 stores in 43 states. Q4 results will be released Feb. 10 after the close. The Street expects 18% earnings growth on an 8% revenue pop. The charts: AutoZone is working on a 14%-deep pattern. The stock is trying to retake the 50-day moving average. Previous breakouts since October 2014 led to gains of 11%, 12%, 7% and 6%. Pullbacks were in the 4%-to-14% range. O’Reilly’s pattern is 19% deep and first stage. The stock is finding resistance at its 50-day line. Previous breakouts since October 2014 led to gains of 24%, 9%, 8%, 12% and 8%. Pullbacks were in the 5% to 19% range. So, if an individual investor plans to trade the stock, the standard 20%-to-25% gain is probably unrealistic. Those who plan to buy and hold through several consolidations might get a bigger profit, if the pullbacks remain minor.