Auto Part Stocks Avoid Crashing

Tim Smith | November 21, 2018

Auto Part Stocks Avoid Crashing
Auto part stocks have remained surprisingly resilient amid the S&P 500, a proxy for the broader stock market, tracking sharply lower into correction territory – down roughly 10% from its Sept. 21 high of 2,940.91. A round of better-than-expected third quarter (Q3) earnings and a perception that auto part stocks are less reliant on strong economic growth compared with other sectors, such as technology, may help explain their relative outperformance. The $130 billion-per-year aftermarket auto parts business provides these companies with mild cyclical fluctuations and slow trend consolidation. Investors may also be impressed with how auto part companies are offering more servicing options to commercial customers, which helps combat increased competition from large online retailers such as Amazon.com, Inc. (AMZN) and Walmart Inc. (WMT) that can't provide the same level of technical expertise. "The battle of the titans between Walmart and Amazon.com Inc. is only just starting," Moffett Nathanson analyst Greg Melich, told CNBC. "The smart companies are doing what they should do, which is lean into the more service-oriented part of the business on the commercial side," he added. Investors who want exposure to this outperforming industry should consider adding one of these three auto part stocks to their portfolio.

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