Americans Will Prove to Be Formidable Do-It-Yourself Mechanics

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Includes: AAP, AZO, PBY
by: Inglefox Investing

With the price of living on an ever-increasing trend, Americans are having to find more resourceful ways of cutting costs. They are cutting discretionary spending and forgoing large purchases such as new automobiles.

The one problem that inherently comes with Americans opting out of a new automobile purchase and sticking with an aging automobile is that the aging automobile, more often than not, will need several repairs done. These repairs also represent significant costs to American families as having a mechanic repair an older vehicle for which a warranty has expired can be quite costly.

This is where the versatility of the American consumer shows up. Americans are pulling out their toolboxes, putting on their mechanic's hats and fixing their vehicles themselves. This is certainly bad news for mom and pop mechanic shops, but good news for the auto part suppliers who these "do it yourselfers" now rely on for parts.

This trend has actually found its way into the recent stock prices of such auto parts suppliers like Autozone Inc. (NYSE:AZO) and Advance Auto Parts Inc. (NYSE:AAP) as year to date both of these stocks are in positive territory, up 2% and 1.6%, respectively. Now that may not sound like a significant amount, but considering the overall market performance, any company that is in positive territory must be doing something right.

What differentiates AZO and AAP from their competitors such as Pep Boys (NYSE:PBY) is that they focus specifically on supplying parts to the "do it yourselfer" and do not operate service shops in addition to a retail store. This model allows them to focus solely on their retail stores without having to worry about a struggling service shop bringing down the profits and raising the costs.

The odd thing about AZO and AAP that makes them very attractive for an option buyer is that they, along with the overall market, have seen their share prices dip recently from their June highs. They should be in for a correction when the market realizes that nothing has changed about their business model and that they will still perform well under current consumer conditions as people continue this "do it yourself" trend.

Look for these companies to rebound soon, making them a good call option purchase for the option traders out there and a sound investment in troubled economic times for the more risk-averse investor.

Disclosure: No position.

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