Tuesday, July 28, 2009

Bookkeeping: Cutting Back O'Reilly Automotive (ORLY) Ahead of Earnings

Two names in the portfolio report tomorrow - O'Reilly Automotive (ORLY) and Wyndham Worldwide (WYN). We only have a 0.4% stake in the latter name, so I'll just let it be, but I am cutting back ORLY despite what I expect to be a good report, both from Americans continuing to spend more on older cars, and the benefits from improving the performance of CSK Auto stores. While ORLY has made a muted move of late in relation to the sexy stocks making 15% rallies per week, it's been a nice move for the type of stock it is. It also showed no weakness during that 4 week correction from mid June to early July - so it's been a nice shelter during the (few) down times of late.

We're moving out of this name at $40.80 and cutting it from a 1.1% stake to 0.1%.

As with the weakness in Walmart I am surprised the investor class, has not moved out of this type of stock, as this is not the type of sector that should flourish if the real economy were full of green shoots. Then again, an economy full of good cheer should not see the populace flocking to Rent a Centers - where Americans can rent things like refrigerators and TVs - that they can no longer afford to buy.

As always listen to what the companies are saying and doing; not the pundits nor "adjusted" government reports. RCII is not the best run company and despite that it's still building a new customer base ;)
  • The Texas-based company said traffic in its stores was higher than expected but the average transaction was lower than it hoped as consumers limiting spending because of the economy.
  • Furniture and appliance rental companies like Rent-A-Center Inc and Aaron's Inc have benefitted from the recession as many cash-strapped U.S. consumers look to rent rather than shop for new items.
Green shoots.

Long ORLY, WYN in fund; no personal position

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