Why I'm Down on This Market Darling

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The following video is part of our "Motley Fool Conversations" series, in which consumer goods editor/analyst Austin Smith and industrials editor/analyst Brendan Byrnes discusses topics across the investing world.

In today's edition, Austin and Brendan talk about one market darling that Austin's thumbs-down on: AutoZone. The company has delivered an incredible 192% over the past five years, but Austin thinks the run is done. He boils down the success of the company to two factors: the age of automobiles on the road and the miles driven. As these two things increase, the demand for aftermarket parts grows. The recent recessionary times we've seen have forced people to hang on to their vehicles longer than normal, pushing up the average age of automobiles. But now that major manufacturers are seeing big sales growth again, that trend is likely to end. With gas tipping above $4 a gallon, people could greatly reduce their driving habits as well. While it's been a good run, it looks like it's time to retire this one.

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At the time this article was published Austin Smith owns shares of PepsiCo. Brendan Byrnes owns shares of Ford. The Motley Fool owns shares of Ford and PepsiCo.Motley Fool newsletter services recommendFord, General Motors, and PepsiCo. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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