Stocks Analysis – Consumer Discretionary Part I: AAP, AMZN, APTV, AZO, BBY, BKNG
A brief qualitative outlook on a few stocks in the S&P500 Consumer Discretionary sector.
Advance Auto Parts – stocks has dropped from index of comparable names; BBB- debt rating; focus on free cash flow (to pay down debt?), makes money from replacement of parts that get worn down by weather (global warming trade?), sells parts and provides services; seems to have friendly personnel based on reviews online
Amazon – highly evolving company that is certainly name brand whether or not tech is in bubble again; sometimes you have to buy expensive stocks if you have a need to own this type of business
Aptiv – sells stuff that makes cars smarter — trend of self-driving cars; derives a fair bit of revenue abroad
Autozone – Do it Yourself only — no revenue from services; investment grade debt rating
Best Buy – very low margins of operating income compared to revenues; makes me think variable costs are low and operating leverage is very high — i.e. a shift in revenues will be reflected in a large shift in operating income on a percentage basis; stock has outperformed
Booking.com – typical internet business: depends on whether you think a website is really real estate and if so, they get a lot of traffic, but Apple and Google may potentially encroach. Their value add isn’t really the tech, it is the address of the website which gets a lot of traffic. They have logistics sorted out with all these hotels for example. Competitor to Expedia.
BorgWarner – sells engines and transmissions and the like for cars — this market projected to shrink by 2023 but they still think they will grow — stock has dropped relative to indices
I haven’t discussed valuations besides noting Amazon is expensive and we can work on those later — but what we have here is a raw grasp of some trades that are possible and reasons to invest in these names.
To be continued….