O'Reilly (ORLY)

O'Reilly (ORLY) is a specialty retailer of automative aftermarket parts, tools, supplies, equipment and accessories. You didn't know about them? Well, if you're a serious investor, you've got a problem because it's been one of the best stocks in the market over the recent years. 

I really really like O'Reilly. I've liked that stock for years.

I remember looking at ORLY for the first time in 2011 (after analyzing most of Sequoia's fund largest holdings) and I didn't really thought it was a great stock back then. But things changed and time showed me I was wrong. Why the fuck am I so often wrong?

The ROE was about 15 in 2011. Today, it's about 62.
The EPS went from 3,71$ to 10,73$ between 2011 and 2016

Very few stocks achieve such performance and such a high ROE.

Plus, their debt is reasonable and they bought back lots of stocks in the recent years. 

However, high ROE stocks can get hurt. It's been the case with Novo Nordisk, my dear very high ROE insulin producer. But, these stocks rarely become cheap even if they get hurt (their PE may go from 25 to 18, but they rarely go from 18 to 10, except for small caps).The current PE of ORLY is 21. The forward PE is between 17 and 18. So, historically, the stock is cheap.

BUT, IT'S CHEAP FOR A REASON, AS ALWAYS. That fucking market knows everything.

Two negative points:

• The growth has slowed down in a significant way in the industry of auto parts. Competitors stocks have gone down too. In fact, at this moment, ORLY is almost at a 2 years bottom. And the market is high. So, I bet that ORLY can go lower than that after a significant correction.
• Amazon is coming in that sector. But I'm not sure that Amazon can compete in such an efficient way against that kind of business. Maybe, but it's not that obvious.  

I like to have some very high ROE stocks in my portfolio. It gives me a sentiment of power. I may very well buy that ORLY stock in the near future if things don't change and if I convince myself that a slowing growth is not that dramatic with a business that gets so much money.