Sometimes monitoring insider trades can point investors towards specific industries before new trends emerge. A few weeks ago, we mentioned that regional and community bank insiders were loading up on stock during the Silicon Valley Bank fallout. Many of those banks rebounded aggressively before the talking heads made note of insiders buying stock on the cheap.
In the last two weeks, we noticed insiders at three companies in a narrow industry buying nearly simultaneously.
Two weeks ago, a pair of insiders at Genuine Parts Company (GPC) bought about $375,000 in stock. (1) Last week, AutoZone, Inc. (AZO) Senior Vice President (SrVP) and Chief Investment Office (CIO) Michelle Borninkhof acquired more than $1.14 million in stock. (2) At the same time, a pair of directors at Advance Auto Parts, Inc. (AAP) invested roughly $327,000 combined.
That’s multiple insiders from a trio of Auto Parts companies coming to the same conclusion in a tight window.
The Automotive Part Aftermarket industry is expected to see accelerating growth in the next few years according to Persistence Market Research. From 2017 to 2022, the industry grew at a medium Compound Annual Growth Rate (CAGR) of 1.9 percent. Total revenue for the industry hit $548 billion in 2022 and is forecasted to reach $984 billion by 2033 with CAGR increasing to 5.5 percent. (3)
The report attributes longer lifespans as one of the primary drivers for heightened demand. They note “Customers are increasingly keeping older vehicles as second vehicles rather than swapping or scrapping them. Because of rising vehicle age, there is a high demand for part replacement, repair, and maintenance, which drives the auto parts sector in the aftermarket.”
According to S&P Global, “The average age of light vehicles in the US reached an all-time high in 2022 as the vehicle fleet climbed to 283M passenger cars and light trucks.
The average age of light vehicles in operation (VIO) in the US rose to 12.2 years this year, increasing by nearly two months over the prior year, according to new research from S&P Global Mobility (formerly the automotive team at IHS Markit).
This is the fifth straight year the average vehicle age in the US has risen. This year’s average age marks another all-time high for the average age even as the vehicle fleet recovered, growing by 3.5 million units in the past year.”
Of the three, Advance Auto Parts is the lowest priced of the trio at $69.59. Wall Street has a one-year price target of $82.54 and pays an annual dividend of $1 per share (1.42 percent dividend yield). (5) Genuine Parts Company also pays a dividend ($3.80 per share for a 2.35 percent annual yield) (6). AutoZone last traded at $2,493.83 and doesn’t pay a dividend.
OVERALL: From experience, it can be a good sign for an industry and new investors when multiple insiders from different companies buy stock at the same time. Market trends and analysis confirm conditions for the Auto Parts Aftermarket sector should improve for the next decade.
In general, the Auto Parts Aftermarket sector has about the same volatility as the S&P 500 and is appropriate for investors with average risk tolerance and at least a one-year time horizon.
1 – https://www.secform4.com/insider-trading/40987.htm
2 – https://www.secform4.com/insider-trading/866787.htm
3 – https://www.persistencemarketresearch.com/market-research/automotive-parts-aftermarket.asp
4 – https://www.spglobal.com/mobility/en/research-analysis/average-age-of-vehicles-in-the-us-increases-to-122-years.html
5 – https://finance.yahoo.com/quote/AAP?p=AAP&.tsrc=fin-srch
6 – https://finance.yahoo.com/quote/GPC?p=GPC&.tsrc=fin-srch