12 Best Car Repair Stocks to Buy Now

Published on February 5, 2024 at 3:21 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 12 best car repair stocks to buy now. If you want to skip our discussion on the auto industry, head over to 5 Best Car Repair Stocks to Buy Now.

S&P Global Mobility predicts a 2.8% year-over-year growth in global new light vehicle sales for 2024. The ongoing recovery in light vehicle production contributes to inventory restocking efforts worldwide, as supply chain and demand show signs of improvement, fueled by sustained pent-up consumer demand. Despite these positive trends, S&P Global Mobility expresses caution about the recovery outlook, citing challenges such as elevated vehicle pricing and difficult credit and lending conditions that may impact consumer demand. According to Colin Couchman, executive director of global light vehicle forecasting for S&P Global Mobility:

“2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment. A major concern is how ‘natural’ EV demand will fare as governments consider scaling back interventionist policy support – especially for incentives and subsidies, industrial policy, and OEM planning targets.”

Fitch Ratings has assigned a neutral outlook for global auto manufacturers and suppliers in 2024. The expectation is that improved supply chains will enable higher global vehicle production, but overall sales may be impacted by less robust economic conditions, particularly in the US and China. Fitch anticipates a 4% increase in global sales and production in 2024. Lower economic growth and higher interest rates are expected to impact vehicle demand, although pent-up demand, resulting from industry underproduction in recent years, is likely to support sales. Despite concerns, Fitch does not anticipate a sales decline in 2024, but sales are expected to remain below pre-pandemic levels. Most global auto sector issuers have stable rating outlooks.

The Business Research Company expects the automotive repair and maintenance market to increase from $907.72 billion in 2023 to $990.04 billion in 2024, indicating a compound annual growth rate of 9.1%. The firm credited this growth in the industry to increasing disposable income, rising environmental concerns resulting in re-use of auto parts, high economic growth in emerging markets, and accelerated urbanization.

On the other hand, artificial intelligence is now being employed in car repair. German automaker Porsche, along with investor UP.Partners, introduced Sensigo in October 2023, a startup based in California. Sensigo utilizes artificial intelligence to empower vehicle service technicians in diagnosing, addressing, and even predicting repair issues. The AI-driven service platform and tools offered by Sensigo aim to enhance the repair process for both customers and technicians, leading to increased profitability for service centers, lower repair costs, and reduced warranty risk.

Some of the best automotive stocks to invest in include O’Reilly Automotive, Inc. (NASDAQ:ORLY), AutoZone, Inc. (NYSE:AZO), and Aptiv PLC (NYSE:APTV).

Our Methodology

We chose the top car repair, auto parts, and auto dealer stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 910 elite hedge funds tracked as of the end of the third quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).

A close-up of an auto assembly line, revealing the complexity of the manufacturing process.

Best Car Repair Stocks to Buy Now

12. Monro, Inc. (NASDAQ:MNRO)

Number of Hedge Fund Holders: 18

Monro, Inc. (NASDAQ:MNRO) is an American company specializing in automotive undercar repair, tire sales, and related services. Established in 1957 and headquartered in Rochester, New York, the company also provides products and services for brakes, exhaust systems, steering, drive train, suspension, and wheel alignment.

On January 24, Monro, Inc. (NASDAQ:MNRO) reported Q3 non-GAAP earnings per share of $0.39, in-line with market estimates. Revenue for the period declined 5.2% year-over-year to $317.7 million, falling short of Wall Street consensus by $7.05 million.

According to Insider Monkey’s third quarter database, 18 hedge funds were bullish on Monro, Inc. (NASDAQ:MNRO), compared to 17 funds in the preceding quarter. Israel Englander’s Millennium Management is the largest stakeholder of the company, with 411,290 shares worth $11.4 million.

In addition to O’Reilly Automotive, Inc. (NASDAQ:ORLY), AutoZone, Inc. (NYSE:AZO), and Aptiv PLC (NYSE:APTV), Monro, Inc. (NASDAQ:MNRO) is one of the best automotive stocks to buy.

In its fourth quarter 2023 investor letter, Palm Valley Capital Management stated the following regarding Monro, Inc. (NASDAQ:MNRO):

“During the quarter we purchased Monro, Inc. (NASDAQ:MNRO. Founded in 1957, Monro is a leading auto repair and tire sales company in the U.S. The company’s stock declined throughout most of the year due to weaker than expected sales. As middle and lower-income consumers struggled to make ends meet, many of Monro’s customers traded down to lower priced tires and delayed auto repairs. Due to these negative trends, the company’s stock traded below our valuation based on normalized free cash flow, so we started a position. Shortly after our purchase, the small cap market rose sharply and took Monro’s shares along for the ride! In an unusual occurrence for our strategy, we sold Monro’s stock during the same quarter it was purchased because its stock price exceeded our calculated valuation.”

11. Allison Transmission Holdings, Inc. (NYSE:ALSN)

Number of Hedge Fund Holders: 24

Allison Transmission Holdings, Inc. (NYSE:ALSN) designs, manufactures, and sells fully automatic transmissions for commercial and defense vehicles globally. Their products cater to trucks, buses, motor homes, and defense vehicles. Allison Transmission Holdings, Inc. (NYSE:ALSN) provides electric propulsion solutions and remanufactured transmissions, as well as replacement parts, support equipment, and services to original equipment manufacturers, distributors, and the U.S. government. It is one of the best automotive stocks to invest in.

On January 18, Allison Transmission Holdings, Inc. (NYSE:ALSN) announced that it has secured an $83.3 million contract to supply enhanced and new X1100 transmissions for Abrams Main Battle Tank variations utilized by the U.S. Army and customers involved in Foreign Military Sales. The delivery of these transmissions was expected to commence in January and extend until December 2024.

According to Insider Monkey’s third quarter database, 24 hedge funds were long Allison Transmission Holdings, Inc. (NYSE:ALSN), compared to 33 funds in the prior quarter.

Here is what Oakmark Funds has to say about Allison Transmission Holdings, Inc. (NYSE:ALSN) in its Q2 2021 investor letter:

“Allison Transmission is a niche industrial company with roughly 80% market share in truck transmissions. Its products provide the company’s customers with critical advantages, including fuel economy, reduced emissions, reliability and total-cost-of ownership. The importance of Allison Transmission’s products and its dominant market position have historically given it strong pricing power. Yet, in the year leading up to our purchase, the company’s shares underperformed peers by more than 40 percentage points. Although we believe the company’s fundamentals are still as strong, if not better, than its peers, investors have worried about how commercial vehicle electrification will affect Allison Transmission’s long-term business. We believe that the company’s investments in next-generation products will enable it to maintain its position as an industry leader, even as technologies change. Furthermore, we believe that our investment carries limited downside risk because Allison Transmission’s shares sell at 10x free cash flow, which ascribes almost no value to the future. In addition, the company’s management team diligently returns capital to shareholders.”

10. Adient plc (NYSE:ADNT)

Number of Hedge Fund Holders: 26

Adient plc (NYSE:ADNT) is based in Dublin, Ireland, specializing in the design, development, manufacturing, and marketing of seating systems and components for passenger cars, commercial vehicles, and light trucks. Adient plc (NYSE:ADNT) primarily serves automotive original equipment manufacturers across North America, South America, Europe, the Middle East, Africa, and the Asia Pacific/China. The company was incorporated in 2016. It is one of the top automotive stocks to watch.

On January 22, Adient plc (NYSE:ADNT) unveiled preliminary financial results for FQ1’24, indicating an anticipated revenue of $3.7 billion, showing no significant growth compared to the previous year. This figure slightly trails the consensus estimate of $3.76 billion. The adjusted EBITDA for the quarter is projected to be approximately $215 million, compared to $212 million in the same period last year. Detailed financial information for FQ1 will be released by Adient plc (NYSE:ADNT) on February 7.

According to Insider Monkey’s third quarter database, Adient plc (NYSE:ADNT) was part of 26 hedge fund portfolios, compared to 24 in the earlier quarter. Andrew Wellington and Jeff Keswin’s Lyrical Asset Management is the leading stakeholder of the company, with 2.4 million shares worth $88.8 million.

9. Snap-on Incorporated (NYSE:SNA)

Number of Hedge Fund Holders: 29

Snap-on Incorporated (NYSE:SNA) is a global manufacturer and marketer of tools, equipment, diagnostics, and repair information for professional users. Snap-on Incorporated (NYSE:SNA) operates through Commercial & Industrial Group, Snap-on Tools Group, Repair Systems & Information Group, and Financial Services segments. The company offers a wide range of hand tools, power tools, tool storage products, and diagnostic solutions to aviation, agriculture, construction, government, military, and mining industries. It ranks 9th on our list of the best automotive stocks.

On November 1, 2023, Snap-on Incorporated (NYSE:SNA) completed the acquisition of Mountz for a cash amount of $40 million. This strategic move widens Snap-on Incorporated (NYSE:SNA)’s torque offerings to clients across diverse sectors such as aerospace, transportation, and advanced manufacturing.

According to Insider Monkey’s third quarter database, 29 hedge funds were bullish on Snap-on Incorporated (NYSE:SNA), compared to 27 funds in the earlier quarter. Cliff Asness’ AQR Capital Management is the biggest stakeholder of the company, with 463,346 shares worth over $118 million.

Ariel Focus Fund made the following comment about Snap-on Incorporated (NYSE:SNA) in its Q2 2023 investor letter:

“Additionally, tool innovator, Snap-on Incorporated (NYSE:SNA), traded up in the period. Solid financial performance across all three of the company’s business segments drove a top- and bottom-line earnings beat. In our view, the automotive repair industry sports a favorable runway due to vehicle age and the increased technological complexity associated with repair. We believe SNA’s value proposition to its end markets remains differentiated, as it continues to invest in new products to service the varying unique characteristics of original equipment manufacturers. In our view, SNA is well positioned for both revenue and profit growth over the next few years.”

8. Modine Manufacturing Company (NYSE:MOD)

Number of Hedge Fund Holders: 30

Modine Manufacturing Company (NYSE:MOD) specializes in providing engineered heat transfer systems and components for original equipment manufacturers (OEM) vehicular applications in on- and off-highway settings. Modine Manufacturing Company (NYSE:MOD) serves different sectors, including automotive, construction, agriculture, and industrial, with operations in North America, South America, Europe, and Asia. It is one of the best automotive stocks to buy.

On January 30, Modine Manufacturing Company (NYSE:MOD) reported a Q3 non-GAAP EPS of $0.74, beating Wall Street estimates by $0.15. Revenue for the quarter amounted to $561.4 million, falling short of market consensus by $33.45 million.

According to Insider Monkey’s third quarter database, 30 hedge funds were bullish on Modine Manufacturing Company (NYSE:MOD), compared to 21 funds in the prior quarter. Mario Gabelli’s GAMCO Investors is the biggest stakeholder of the company, with 2.5 million shares worth $115.2 million.

Carillon Chartwell Small Cap Value Fund made the following comment about Modine Manufacturing Company (NYSE:MOD) in its Q3 2023 investor letter:

“Modine Manufacturing Company (NYSE:MOD) was another strong performer. Modine’s performance technologies segment is experiencing high demand as it provides thermal solutions for electronic vehicle (EV) and hybrid vehicle manufacturers. The company also has focused on growth opportunities in the data-center market, selling data center cooling solutions needed for energy intensive artificial intelligence (AI) projects.”

7. Gentex Corporation (NASDAQ:GNTX)

Number of Hedge Fund Holders: 32

Gentex Corporation (NASDAQ:GNTX) is a global company engaged in designing, developing, manufacturing, and supplying digital vision, connected car, dimmable glass, and fire protection products. The company, incorporated in 1974 and headquartered in Zeeland, Michigan, serves customers worldwide. It is one of the best automotive stocks to invest in, ranking 7th on our list based on hedge fund sentiment.

On January 26, Gentex Corporation (NASDAQ:GNTX) reported a Q4 GAAP EPS of $0.50 and a revenue of $589.1 million, outperforming Wall Street estimates by $0.05 and $26.93 million, respectively.

According to Insider Monkey’s third quarter database, 32 hedge funds held stakes in Gentex Corporation (NASDAQ:GNTX), compared to 37 funds in the prior quarter. John W. Rogers’ Ariel Investments is the leading stakeholder of the company, with 6.9 million shares worth $225 million.

Here is what Ariel Fund & Ariel Appreciation Fund has to say about Gentex Corporation (NASDAQ:GNTX) in its Q3 2021 investor letter:

“During the quarter, we added leading supplier of automatic-dimming mirrors for the automotive industry, Gentex Corporation (GNTX), to Ariel Fund and Ariel Appreciation Fund. With over 90% market share and a long history of technological innovation and manufacturing capability, the company consistently outgrows the broader industry, produces best-in-class operating margins, and generates attractive free cash flows. Recently, the stock has underperformed due to broad-based supply chain concerns and the disruption of global automotive production. We view these worries as overblown and see this as an opportunity to own a high-quality, niche franchise with excellent and improving growth prospects, well-positioned to benefit from growing market adoption of its essential technologies.”

6. Lear Corporation (NYSE:LEA)

Number of Hedge Fund Holders: 32

Lear Corporation (NYSE:LEA) is a global automotive supplier that designs, manufactures, and supplies automotive seating, electrical distribution systems, and related components. The company’s Seating segment provides a wide range of seat systems, trim covers, mechanisms, and other components for different vehicle types. Lear’s E-Systems segment focuses on electrical distribution and connection systems, offering wire harnesses, connectors, electronic modules, and software solutions, including in-vehicle commerce platforms and cybersecurity software. Lear Corporation, founded in 1917, is headquartered in Southfield, Michigan. The stock ranks 6th on our list of the 12 best car repair stocks to buy now.

On October 26, Lear Corporation (NYSE:LEA) reported a Q3 non-GAAP EPS of $2.87 and a revenue of $5.8 billion, outperforming Wall Street consensus by $0.25 and $190 million, respectively. In the third quarter of 2023, Lear Corporation (NYSE:LEA)’s operating activities generated $404 million in net cash, while free cash flow amounted to $251 million. This marks an increase from the $252 million and $112 million reported for the same period in 2022, respectively.

According to Insider Monkey’s third quarter database, Lear Corporation (NYSE:LEA) was found in 32 hedge fund portfolios, compared to 26 funds in the prior quarter. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 6.5 million shares worth $874.3 million.

Like O’Reilly Automotive, Inc. (NASDAQ:ORLY), AutoZone, Inc. (NYSE:AZO), and Aptiv PLC (NYSE:APTV), hedge funds are piling into Lear Corporation (NYSE:LEA).

Diamond Hill Capital Mid Cap Strategy made the following comment about Lear Corporation (NYSE:LEA) in its Q2 2023 investor letter:

“As markets have risen, we have been cautious about deploying cash. That said, we are still finding attractive values in the market and capitalized on attractive entry points to initiate three new positions in Q2: Ferguson, SBA Communications Corp and Lear Corporation (NYSE:LEA).

Lear is a leading manufacturer of global automotive seating and is end-market agnostic to the ICE/EV (internal combustion engine to electric vehicles) secular shift. Lear has a stable business with attractive cash-generation capabilities. A recent market selloff allowed us to establish a market position at an attractive discount to our estimate of intrinsic value.”

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