5 Best Auto-Parts Stocks to Buy for 2021

Page 5 of 5

1. O’Reilly Automotive Inc (NASDAQ: ORLY)

Missouri-based O’Reilly Automotive Inc (NASDAQ: ORLY) ranks 1st on the list of 10 best auto-parts stocks to buy for 2021. Out of 816 hedge funds tracked by Insider Monkey, 58 held positions in the company as of the end of the third quarter, compared to 61 funds in the previous quarter. Earlier in December, Bank of America gave bullish comments about O’Reilly Automotive with a Buy rating. The firm said that the company has a relatively high exposure to the recovering pro customer base, with strong cash flow generation throughout the coronavirus crisis.

In November, investment firm Oppenheimer upgraded the stock to Outperform from Market Perform. The firm cited rising vehicle ownership, improvement in miles driven and rebounding commercial activity for the stock rating upgrade. We presented Qualivian Investment Partners’ detailed ORLY thesis recently. Here is an excerpt:

ORLY is currently trading at 21.5X NTM5 P/E and 1.0X NTM relative P/E to the market, somewhat richer compared to its historical ranges in absolute terms and quite a bit cheaper on relative terms.

ORLY has historically traded at a premium to the S&P 500 given its superior growth and return profile: ─ 10-Year average for NTM P/E: 19.8X (with a range of 16.8X to 22.7X at +/- 1SD around the mean). ─ 10-year average for NTM P/E relative to the S&P500: 1.3X (with a range of 1.1X to 1.5X at +/- 1SD around the mean).

ORLY meets our requirements of being a quality compounder: (1) it has sustainable competitive advantage, (2) has good reinvestment opportunities, and (3) has demonstrated excellent capital allocation.

Please also see 10 Best Auto Stocks To Buy Now and 10 Best Value Stocks To Buy Now.

Follow us on Twitter: https://twitter.com/insidermonkey

Follow O Reilly Automotive Inc (NASDAQ:ORLY)

Page 5 of 5