Despite the broader industry’s cyclical nature and the regulatory and supply chain risks that underlie companies, allocating investments to auto stocks can provide exposure to an expanding industry that is also innovative. The automotive industry has undergone a massive transformation toward electric vehicles and autonomous driving. Moreover, the adoption of hybrid technology has driven significant demand for more fuel-efficient, lower-emission vehicles.
Yet there are rising concerns for the U.S. auto businesses regarding consumer affordability. On January 26, CNBC published an article on the U.S. automotive industry, which, despite exhibiting resilience during the post-Covid era, is now expected to enter into a renewed phase of uncertainty. The industry was able to navigate through challenges over the last 6 years, which erupted due to supply chain issues, raw material shortages, and tariffs. However, the foreseeable future is likely to be characterized by lackluster consumer demand and affordability concerns, which will be slightly more difficult to tackle.
The article highlighted comments from Ford Motors CEO Jim Farley, who said:
“Anyone in the auto industry… we should all be very careful about consumer demand, that’s really important.”
It also referred to Hyundai North America CEO Randy Parker, who commented:
“We’ve got to plan for the worst and hope for the best, that’s the situation that we’re in right now.”
Given affordability concerns across the broader auto industry, it is fair to say that auto parts businesses will also come under pressure. However, there is potential for investors to identify interesting opportunities in this segment. With that background, let’s explore our selection of 8 best Auto Parts stocks according to Hedge Funds.
Copyright: microolga / 123RF Stock Photo
Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed auto parts companies with market capitalizations above $2 billion. We then added a filter to exclude companies with share prices below $5 to ensure we do not include penny stocks on our list. We also shortlisted only stocks with at least 5% upside potential according to TipRanks consensus as of the January 29 close.
In the final part of the screening, we identified the number of hedge funds that held positions in these stocks as of the end of the third quarter of 2025. Finally, we selected 8 stocks with the highest number of hedge funds holding stakes and ranked them in ascending order.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
8. Advance Auto Parts (NYSE:AAP)
Number of Hedge Fund Holders: 32
Advance Auto Parts (NYSE:AAP) is one of the best Auto Parts stocks according to Hedge Funds.
On January 21, Aaron Reed from Northcoast Research indicated his optimism around Advance Auto Parts (NYSE:AAP). He upgraded his rating on the stock from Neutral to Buy, and estimated a price target of $55, which yields an upside of over 14%. Reed’s rating is based on his expectations of strong demand trends during 2026, following the ongoing performance enhancements.
On the flip side, TD Cowen analyst Max Rakhlenko reduced his price target on the stock substantially, from $62 to $46, and reiterated his Hold rating, according to The Fly. The revision was part of the analyst’s target adjustments across his hardlines group coverage.
Back on December 16, Greg Melich of Evercore ISI had reaffirmed his In-Line rating for Advance Auto Parts (NYSE:AAP). In the process, he revised his target price estimate for the stock from $58 to $56. Despite this downward revision, the stock still offers over 16% upside potential to investors from the prevailing level.
Advance Auto Parts (NYSE:AAP) provides automotive aftermarket parts such as batteries, brake pads, chassis parts, clutches, engine parts, exhaust systems, and more. Serving both professional installers and DIY customers with a balanced sales mix, the company operates more than 4,700 Advance Auto Parts and Carquest stores.
