Homepage / Investment / Cramer: Auto parts stocks like O'Reilly wrongly sold off and are buys
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election

Investment

Cramer: Auto parts stocks like O'Reilly wrongly sold off and are buys

The midwinter bounce in auto parts stocks O’Reilly Automotive, Advance Auto Parts and AutoZone did not go unnoticed by CNBC’s Jim Cramer.

“First AutoZone and O’Reilly bounced from their lows over the summer, then Advance Auto Parts seemed to bottom last month. It’s now up 28 percent from its lows on Nov. 8,” the “Mad Money” host said. “That’s a magnificent move. More important, if the auto parts business is really back on track, then these stocks are dirt-cheap in a market where we’re constantly hearing people fretting about sky-high valuations.”

All three stocks served shareholders well from 2013 to 2016, when people were less eager to buy new cars following the financial crisis and, as a result, had to replace car parts more often.

But starting in 2017, all three fell off a cliff. The proximate cause? Amazon’s rumored foray into the auto parts industry.

In late January, Wall Street started buzzing about the e-commerce giant’s potential disruption in auto parts, and shares of O’Reilly, Advance Auto and Autozone all got slammed.

Shortly after, auto parts retailers started issuing dismal earnings reports. Even though the weakness had nothing to do with Amazon, it looked bad given the worries about potential competition.

In February, Advance Auto and AutoZone both reported shortfalls. O’Reilly’s results, usually the strongest of the three, still beat estimates.

By spring, all three were struggling: Advance Auto’s earnings missed expectations by far, with same-store sales were down 2.7 percent; AutoZone reported a gigantic miss; and O’Reilly disappointed analysts despite giving decent guidance.

“So what caused these hideous numbers? The one thing that all three companies kept citing as an alibi for their poor performance was the very mild winter, [the] second mild one in a row,” Cramer said.

Cold winters tend to raise the need for car maintenance and part replacement, so mild winters result in less overall demand for replacement car parts.

Last year’s mild winter also resulted in dramatic sell-offs for the car parts plays. Advance Auto slid from $169 a share at the beginning of 2017 to $78 a share when it bottomed a month ago; AutoZone fell from $789 to $491 at its July lows; O’Reilly tumbled from $278 to $169.

But come fall, all three stocks started gaining strength. Advance Auto gave Wall Street a big earnings beat and re-affirmed its full-year guidance; AutoZone delivered a strong quarter; and O’Reilly beat estimates and raised its full-year forecast.

“I think the market may have overreacted in the first half when these companies reported a wave of shortfalls and everyone was freaking out about ‘Death Star’ Amazon,” Cramer said.

“I’ve even recommended Advance Auto Parts as a takeover target at the Deal Economy conference a couple weeks ago because Jeff Smith, who runs Starboard Value, the activist fund, is Advance Auto’s chairman. I bet he’d love to get [a deal] out of this one,” he added.

And all three stocks are still fairly cheap, Cramer said: Advance Auto trades at 17 times next year’s earnings estimates, AutoZone at 14 times and O’Reilly at 19 times.

“The sell-off was a total rush to judgment,” the “Mad Money” host concluded. “Which one should you buy? … You can take your pick. You can buy best of breed, that’s O’Reilly. You can bargain-hunt with AutoZone or you can speculate on a takeout with Advance Auto Parts. Boy, this industry, it’s got something for everybody.”

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer’s world? Hit him up!
Mad Money TwitterJim Cramer TwitterFacebookInstagramVine

Questions, comments, suggestions for the “Mad Money” website? madcap@cnbc.com

Source: Investment Cnbc
Cramer: Auto parts stocks like O'Reilly wrongly sold off and are buys

Comments are closed.