Thanks for developing this case study. This industry is fascinating as it's not about anything new, indeed just the retailing of auto parts--yet the rewards to investors in Auto Zone and O'Reilly have been nothing short of spectacular. I am still surprised by the levels of profitability in this retail sector!
I came across Auto Zone in the mid 2000s, but steered away due to the high, and increasing debt the company took on to buy back shares, and I perceived this as simple financial engineering in hopes of a short-term pop at the risk of increased financial fragility.
I instead bought O'Reilly, and that was early enough to be able to talk to the CEO on his cellphone en route to a store visit. My big regret was selling much too soon, as the company appeared substantially overvalued on several different valuation approaches. It would have been much better to not have sold at all, or at least to have just trimmed the position.
Fortunately, I learned my lesson, and have held MasterCard and Visa since the late 2000s. :-)
I try hard in these case studies to put the reader back in the shoes of someone at the time of investment, but no case study can capture everything, like seeing a high P/E as an expensive stock and selling too early. There are counter-examples of your plight too; it would have been correct to sell Coca-Cola at a 50 P/E in the year 2000, for example.
Thanks for this
Thanks for developing this case study. This industry is fascinating as it's not about anything new, indeed just the retailing of auto parts--yet the rewards to investors in Auto Zone and O'Reilly have been nothing short of spectacular. I am still surprised by the levels of profitability in this retail sector!
I came across Auto Zone in the mid 2000s, but steered away due to the high, and increasing debt the company took on to buy back shares, and I perceived this as simple financial engineering in hopes of a short-term pop at the risk of increased financial fragility.
I instead bought O'Reilly, and that was early enough to be able to talk to the CEO on his cellphone en route to a store visit. My big regret was selling much too soon, as the company appeared substantially overvalued on several different valuation approaches. It would have been much better to not have sold at all, or at least to have just trimmed the position.
Fortunately, I learned my lesson, and have held MasterCard and Visa since the late 2000s. :-)
That’s awesome.
I try hard in these case studies to put the reader back in the shoes of someone at the time of investment, but no case study can capture everything, like seeing a high P/E as an expensive stock and selling too early. There are counter-examples of your plight too; it would have been correct to sell Coca-Cola at a 50 P/E in the year 2000, for example.
Nice job buying and holding onto MA and V.