Here’s Why the RS Large Cap Value Strategy Decided to Exit Its Position in LKQ Corporation (LKQ)

RS Investments, an investment management company, released its “RS Large Cap Value Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The strategy underperformed the benchmark, Russell 1000 Value Index, in the quarter, returning 4.47% net vs 5.33% for the Index. Adverse stock selection in the Consumer Discretionary and Consumer Staples sectors impacted the portfolio’s performance in the quarter. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, RS Large Cap Value Strategy highlighted stocks such as LKQ Corporation (NASDAQ:LKQ). LKQ Corporation (NASDAQ:LKQ) is a leading distributor of vehicle products and parts to repair, maintain, and accessorize automobiles. The one-month return of LKQ Corporation (NASDAQ:LKQ) was 3.08%, and its shares lost 15.76% of their value over the last 52 weeks. On October 27, 2025, LKQ Corporation (NASDAQ:LKQ) stock closed at $31.48 per share, with a market capitalization of $8.1 billion.

RS Large Cap Value Strategy stated the following regarding LKQ Corporation (NASDAQ:LKQ) in its third quarter 2025 investor letter:

“LKQ Corporation (NASDAQ:LKQ) is the largest provider of alternative vehicle products to the collision repair industry in North America, with unmatched size and scale that is multiple times the size of its closest competitors. Historically, the company has been able grow at GDP+ in a fairly recession-resistant industry given the breadth of its offerings, the scale of its distribution, and the general trend toward the use of less expensive alternative parts vs. OEM parts. The last 18 months have been anything but typical for the historically stable collision repair industry. As a result of the cumulative effects of inflation on automobile insurance rates, as well as parts and labor inflation impacting the cost of collision repair, the industry has seen a cumulative decline of more than 15% in vehicle repair volumes during this time period. LKQ’s business has fared better but has still been down a cumulative 8% 9% on volumes. To put that decline in perspective, the only other worse period (inclusive of previous recessions) was during the first few months of the Covid pandemic, when vehicle miles traveled were down meaningfully for a brief period of time. LKQ’s stock underperformed in the quarter as the anticipated stabilization of the North American collision repair market simply has not materialized yet. With incremental tariffs on certain auto parts imported from outside of the U.S. expected to add to the already high cost of collision repair, we decided to exit our position in LKQ for the time being and put the name back on the farm team. We will continue to monitor the industry and reassess the potential for a future investment as the environment warrants.”

In another article, we covered LKQ Corporation (NASDAQ:LKQ) and shared Palm Valley Capital Fund’s views on the company. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.