O’Reilly Automotive Inc (NASDAQ:ORLY) Creates Value for Shareholders and Customers

January 6, 2017

Portfolio Manager Julian Pick of Polen Capital says O’Reilly Automotive Inc (NASDAQ:ORLY) is a compelling business that has created value for both shareholders and customers.

The largest fleet of cars in the United States — sorry, in the world is here in the United States. People really depend on their cars here, I think you’ll agree, whether it’s a school run or getting to and from work or perhaps going to visit a relative, they are indispensable. So they need health care, they need over-the-counter health care just like people do, and O’Reilly is a leading supplier of parts, not just to individual owners, but to the trade, to professional car repairs as well.

It’s an intriguing business in a way, because when you need your car repaired, you really need it repaired today. You don’t really have that luxury of waiting around for a couple of weeks for the right parts to come in. The other side — intriguing aspect of this is that most people are driving older cars…because they tend to be more valuable; they tend to be more reliable than they were a few decades ago. In other words, it’s really worth investing or repairing your vehicle. You can expect more miles that in the same vehicle than you can before. Yet the industry that controls distribution of car parts is still rather fragmented.

O’Reilly is one of very few that achieved economies of scale in distributing car parts, meaning not just availability of sheer numbers of parts, but also speed of delivery and ability to work closely with you as an owner or indeed with the shop. So you’re right, it’s a different part of the world. It’s a very different business model, but it also strikes us as a fairly compelling business that creates a lot of value for the shareholders as well as for its customers.

Julian Pick