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Automotive Stock of the Day: LKQ Inc. (LKQX)

Posted in auto industry, Tips by Vito Rispo | July 31st, 2008 | 1 Response |

LKQ Inc. (LKQX) is a company that manufactures and sells aftermarket auto parts. They manufacture the parts mostly in Taiwan and sell mainly to auto repair businesses, service shops, and dealerships in the United States and Canada where they have about 300 locations. They’re the dominant aftermarket parts sellers in most of the country, so chances are, when you go to a local repair shop and get a new aftermarket part, it came from LKQ.

When I worked at my family’s auto salvage and repair shop, I dealt with LKQ on a daily basis. We had 8+ acres of salvage cars and a huge warehouse of inexpensive used parts to sell, but it was still often times cheaper to buy new parts from LKQ for resale. They’re an extremely efficient company with a high quality, very low cost product.

Because of the economic climate right now, people are keeping their cars longer and repairing them instead of getting new ones; and as a result, LKQ has been doing tremendously well. In fact, over the past year the stock has almost doubled in value. Today especially (07/31/08) there was a 15% jump because their second quarter financials beat expectations. This means that a lot of the good news is already factored in to the price of LKQX. So don’t necessarily run out and buy 1000 shares, just keep them on your radar, and watch for a nice, low, calm time to buy. They’re a long term stock, and will continue to do well.

Certain things about the auto industry will always be relevant. People are always going to need cars. It doesn’t matter if the cars are powered by hydrogen or electricity or water or miniature nuclear reactors, we’re always going to need some kind of automobiles. Those automobiles will always be made up of smaller parts; and those parts will always need replacements. That’s what LKQ does. Value.

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