Investing $10,000 in O'Reilly Automotive During a Bear Market

Despite the Nasdaq Composite Index's significant rise of 36% in 2023, suggesting a robust bull market, investors must still plan for the potential downturns of a bear market. A strategic investment in turbulent times could be the inclusion of shares from resilient companies like O'Reilly Automotive (ORLY) in a well-diversified portfolio. With $10,000 set aside for investment, this company presents an attractive opportunity.

Consistent Growth Amid Economic Challenges

O'Reilly Automotive has demonstrated remarkable growth, with its third-quarter revenue and same-store sales witnessing an 11% and 8.7% increase year over year. The company has expanded its footprint by opening 140 new stores year-to-date. Its earnings per share also rose by 17%, bolstered by a strategy of consistent share repurchases. With a simplified approach, it's easy to appreciate these robust financials and the company's expectation of a 7% to 8% increase in same-store sales and a projection of a mid-range 51% gross margin and 20% operating margin for the year.

Primed for a Recession

O'Reilly's business model makes it uniquely recession-resistant. The company supplies essential automotive aftermarket parts, ensuring that during economic slowdowns when customers may defer new car purchases, they still seek maintenance parts for their existing vehicles. And in healthier economies, increased driving leads to higher wear and tear on cars, similarly driving demand for O'Reilly's offerings. This duality positions O'Reilly as a strong candidate for investment during uncertain market conditions.

Evaluating Stock Value

O'Reilly's stock performance has outpaced broader market indices, delivering a stunning 176% and 690% return over the past 5 and 10 years, respectively. Though currently not the cheapest at a trailing price-to-earnings multiple of 26, a bear market could correct the stock's valuation, offering an appealing entry point. For those who can't wait for a market downturn, steadily purchasing shares through dollar-cost averaging could be a practical approach, mitigating the impact of volatility.

Investment, Strategy, Resilience