Thierry from arvy
CFA, Co-Founder & CIO of arvy, Quality Investing
AutoZone and O'Reilly are quality businesses worth a premium because stronger auto parts retailers keep taking share from weaker rivals. The industry was once highly fragmented, with the top five holding under 5% combined; today large operators such as AutoZone and O'Reilly control about 25% and keep outperforming. Quality stocks look expensive only in absolute terms, so business quality matters more than valuation, though even the best companies should not be overpaid for. x.comÂ
AutoZone and O'Reilly win in good and bad economies because people keep cars longer, and older cars need more parts. The average US car aged from 9.9 years in 2003 to 13.6 in 2023, and both tight money and pricier new cars stretch that further. Both are cannibals that pour free cash flow into buybacks; AutoZone has retired more than 80% of its shares since the late 1990s. That has made them two of the great compounders of the past 25 years. x.comÂ
These 12 stocks are quality compounders sharing pricing power, recurring demand, strong returns on capital and disciplined management. Domino's earns royalties, AutoZone serves an aging fleet, Progressive underwrites with data, Waste Management owns routes and landfills, Grainger is embedded in operations, S&P Global and FICO are mission-critical, Rollins has recurring pest control, Copart an auction network, Visa a fee network, HEICO niche aerospace parts, Costco loyal members. x.com x.com … Show more
Dollar General, Ollie's and AutoZone should hold up in tough times by selling everyday essentials, closeout bargains and what keeps cars running. Dollar General is the top pick and a Buy, AutoZone a Buy and Ollie's a Speculative Buy. Recession-ready does not mean recession-proof. x.comÂ
Nvidia, McDonald's, American Express, AutoZone, Pool Corp, Nu Holdings, Domino's Pizza and Salesforce stand out as quality companies trading under 20x forward earnings. x.com x.com x.com x.com x.com x.com x.com x.comÂ
O'Reilly Automotive appears again on a list of favoured stocks, without a stated new reason. x.comÂ
Mastercard, AutoZone, Booking, Apple, Caterpillar, ADP and Fair Isaac are buyback machines, among the best stocks to own, because each has consistently reduced its share count. That raises each shareholder's ownership stake every quarter without lifting a finger. x.com x.com x.com x.com x.com x.com x.comÂ
Owning quality does not require paying a premium, even with the market expensive at all-time highs. DLocal, Dave, Meta, McDonald's, Lumine, Sezzle, Root, Nu, Constellation Software, Intercontinental Exchange and Uber are high-quality companies trading at 20 times earnings or less, and Fair Isaac, at 21 times, is worth including for its quality. x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.com x.comÂ
Dollar General may be in a turnaround the market is missing, with improving traffic, expanding margins and a stronger balance sheet. Similar signs showed up in Advance Auto Parts when Wall Street had largely given up on it, before its shares roughly doubled within 30 days. x.comÂ
