by Dolf

Created on: April 23, 2009   Last Updated: April 27, 2009

Even though the stock market is harder than ever to predict these days, savvy investors are scooping up bargains. One sector of the economy that historically does well in a recession is auto parts retailers. This is primarily due to the fact that when people are concerned about the economy and the possible loss of their jobs, major purchases are delayed and cash is consolidated. Vehicles that would normally have been sold or traded in for a new model are retained and kept running via the purchase of auto parts from national and local auto parts retailers.

The average age of cars on the road is increasing. Some estimates are that it is now over 9.3 years on average. This means that national parts retailers such as Autozone, Advance Auto Parts, and Pep Boys see an increase in business. One must remember that autos of today are more efficient and as a result more complex and harder to repair than even 5 years ago. Yet, certain items (mainly items not related to on-board electronics) are able to be repaired by vehicle owners who have mechanical aptitude, the ability to read and understand exploded diagrams, and of course, the right tools.

Brakes, starters, batteries, filters, water pumps, serpentine belts, etc. are just a few examples of the parts that wear out and may be replaced by vehicle owners. In many cases, replacement of these parts do not violate vehicle warranties. Depending on the experience and skill of the "do it yourselfer" many of these repairs may be in accomplished in a few hours.

Thus, the auto parts retailers mentioned, are seeing an overall increase in their stock value. Autozone (AZO) traded on the NYSE has a 52 week high of $169.13 and a low of $84.66. Advance Auto Parts (AAP) is traded on the NYSE and has a 52 week high of $45.52 and a low of $24.03. Pep Boys (PBY) is also traded on the NYSE and is showing a 52 week high of $10.35 and a low of $2.62. In looking at the highs and lows, investors can see that the pressure on the per share price is upward. In a market of less volatility, the upward price could be sustained. As of April 23rd, Autozone was at $162.02, Advance Auto parts was at $43.58, and Pep Boys was at $8.26. These per share prices are well above the 52 week low.

Since many economists predict that our economy is showing some signs of strengthening, there is still little hope that much will improve before 2010. As any investor knows, profits can be made as the market moves up or down. In the arena of auto parts retailers, the trend is moving up and this is one possible avenue of bolstering one's diversified portfolio. Based on the price spread for these three national retailers, it seems that even the small investor has an opportunity to improve his or her portfolio. Of course, their is always risk. Here however, is a sector of the economy that is enjoying growth based on consumer need.

Bear in mind that it isn't just the "do it yourselfer" that is purchasing parts. Vehicle owners that are taking their cars to professionals to have them keep their cars on the road longer, are also adding to the profits of auto parts retailers. Professional mechanics need to purchase high quality parts too.

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