Stifel, Nicolaus & Co. Analyst James Albertine says his current top stock recommendation is LKQ Corporation (LKQ). He says LKQ is the largest player – the 800-pound gorilla – in the collision and mechanical aftermarket parts distribution industry.
“When a vehicle comes off warranty, the propensity to use alternative parts — be it recycled, remanufactured or refurbished parts — rises substantially,” he says.
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Based on where in the cycle of the space SAAR recovery is, Albertine expects to see growth in three- and four-year old vehicles at the beginning of next year. He says that should support the LKQ story for the next four to five years.
“LKQ’s ‘sweet spot’ is between three- to eight-year-old vehicles,” Albertine says. “So where we are in the cycle really determines our call on LKQ.”
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