5 Stock Picks of Michael O Keefe’s 12th Street Asset Management

2. LKQ Corporation (NASDAQ:LKQ)

12th Street Asset Management’s Stake Value: $38 million

Percentage of 12th Street Asset Management’s 13F Portfolio: 8.4%

Number of hedge fund holdings: 38

LKQ Corporation (NASDAQ:LKQ) is a distributor of automotive parts used to repair and refurbish vehicles. The company is headquartered in Chicago, Illinois and it was founded in 1998.

LKQ Corporation (NASDAQ:LKQ) reported $3 billion in revenue and $0.96 in GAAP EPS in its Q3, beating analyst estimates for both.

Mr. O’Keefe’s 12th Street held 756,953 LKQ Corporation (NASDAQ:LKQ) shares by the end of the third quarter of 2021. These are worth $38 million and represent 8.4% of the firm’s portfolio. 38 of the 867 hedge funds surveyed by Insider Monkey held a stake in the transportation company by the end of the third quarter of this year.

LKQ Corporation’s (NASDAQ:LKQ) largest shareholder is Jeffrey Ubben’s ValueAct Capital who holds 21 million shares worth $1 billion.

In its Q1 2021 investor letter, Bonsai Partners mentioned LKQ Corporation (NASDAQ:LKQ), stating that:

“LKQ is the largest provider of alternative collision and mechanical automotive parts in the United States. In Europe, they are the leading distributor of general automotive maintenance parts and supplies. Its shares appreciated 20.1% during the quarter.

During the quarter, LKQ shared its fourth-quarter results: showing a slight revenue decline and a nearly 30% increase in quarterly profit Vs. the same period last year. COVID has proved a surprising catalyst for my investment thesis which revolves around optimizing their recent large acquisitions that were never efficiently integrated.

Admittedly, in addition to LKQ’s quarterly performance, thematically, there has been broad enthusiasm for “re-opening” trades, of which, LKQ has been a beneficiary. Most importantly, the prior overhang related to LKQ’s debt burden is now all but behind us. Their net debt to EBITDA ratio now sits below 2x, a stark change from the near 3x leverage ratio before the pandemic. At that time, LKQ’s leverage had the potential to spiral upward to nearly 4-5x if the business experienced a prolonged shutdown. It’s good to be past this issue.”