With their strong performance of 2010 behind them, auto parts retailers like Advanced Auto (NYSE:AAP), AutoZone (NYSE:AZO), O'Reilly (Nasdaq:ORLY) and Genuine Parts (NYSE:GPC) are considered vulnerable by FBR Capital in 2011.
FBR said, "Auto parts retail has begun to experience underperformance vs. the S&P 500 over the last two trading days. Investors are starting to treat this group as a source of funds. This is consistent with our downgrade of AAP 11/8/10, as well as our 2011 outlook piece published 12/15/10.
"These stocks were a relative safe haven in 2010 and are therefore more vulnerable in 2011. 2010 outperformance vs. the S&P 500 was the following: Advanced Auto +63%, AutoZone +72%, O'Reilly +58% and Genuine Parts lagged but was also up 35% yoy, compared with the S&P 500 of 12.8% and the hardline retail group average of 27%. We believe the easy risk/reward money here has been made for the time being, and investors are likely to be more cautious with their positions in this group at this stage…hence, a source of funds. We expect this stance to continue. GPC looks particularly vulnerable, still trading at north of 16x NTM P/E, in our view. We would use sub sectors, such as home improvement (namely Home Depot (NYSE:HD)) or office supply (namely Office Depot/ODP or United Stationers (Nasdaq:USTR)) as uses of funds."
No comments:
Post a Comment