Polen Capital Management, LLC, an independently-owned global investment manager, recently published its first-quarter global growth commentary – a copy of which can be downloaded here. During the first quarter of 2020, the Polen Global Growth Model Portfolio returned -12.68% gross of fees, while the MSCI AllCountry World Index was down 21.36%.
In the said letter, Polen Capital highlighted a few stocks and O’Reilly Automotive Inc (NASDAQ:ORLY) is one of them. O’Reilly Automotive is an auto parts retailer that offers automotive aftermarket parts, tools, supplies, equipment, and accessories. Year-to-date, ORLY stock lost 11.1% and on April 28th it had a closing price of $384.50. Its market cap is of $28.9 billion. Here is what Polen Capital said:
“We sold O’Reilly Automotive in response to the unique circumstances surrounding the coronavirus spread mitigation in the United States. In nearly any financial stress environment, we think O’Reilly would be positioned to play the role of a strong safety in the Portfolio. It is a counter-cyclical business because car maintenance can only be put off for so long, regardless of the strain on households. As we have written innumerable times, the industry can be thought of as “healthcare” for vehicles. One key variable for this dynamic, however, is that people need to be driving their cars for parts to break down. While social distancing practices will certainly impact all our companies in some form or fashion, we felt it potentially could have a more meaningful impact on O’Reilly. The company may see not only severely reduced store traffic in the near term, but also a delay in maintenance requirements resulting from a potentially significant reduction in miles driven, particularly if the spread mitigation is prolonged. Its higher-than-average debt burden also creates some risk, and we suspect that earnings growth will moderate as share buybacks are curtailed. No single issue is unmanageable, but considered in aggregate, we felt the investment case had weakened.”
In Q4 2019, the number of bullish hedge fund positions on ORLY stock increased by about 36% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.