When I see that some fund managers that I like sell some exceptional stock, my first postulate is that they lost their mind. Why selling a great stock that grew a lot in the past even if it grows a bit less today, but still grows more than the average stock?
Let's get specific: why did Sequoia Fund and Giverny Capital sold their O'Reilly stake some months ago? Both were very fond of that stock not so long ago and they chosed to sell it...
O'Reilly sells auto parts. That's one of the few sectors where it's not necessary to think too much before investing. Of course, there's bad businesses in the sector, but it's not a crumbling sector like clothes and computers retailing.
Earnings grew annually 20% over the last 5 years. They're expected to grow by about 15% over the next 5 years. Plus, their ROE has been over 100% since 2017!
A little more numbers:
Sales growth of 19,4% during the last quarter (in the middle of a fucking pandemic!)
EPS growth of 57% during the last quarter (in the middle of a fucking pandemic, once again!)
Performance 1 year: 25%
Performance 5 years: 100%
That stock is great. Of course, it's not Shopify. But you can value O'Reilly while you can't value Shopify.
At 22 times next year's earnings, that stock is not overly expensive. Estimates are about 15% growth each year for the next 5 years. There's a lot of stocks that are selling for much more than that for a similar growth. And O'Reilly proved that it was able to achieve good growth, which isn't the case for all the promising stocks.