NEW DIRECTIONAL CALL PLAYS
O'Reilly Automotive - ORLY - close: 156.96 change: +1.54
Stop Loss: 151.49
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 626 thousand
Entry on August -- at $---.--
Listed on August 25, 2014
Time Frame: 6 to 12 weeks
New Positions: Yes, see below
Why We Like It:
The U.S. economy is slowly improving. We are seeing slow but consistent job growth. Yet consumers remain cautious. While there has been a healthy trend of new car sales this year most consumers are keeping their old cars. Of the 247 million cars in the U.S. the average age is at a record high. Passenger cars have hit an average age of 11.4 years while light trucks are at 11.3. If consumers are keeping their cars this long that is going to mean more replacement parts and repairs. That has been good news for the auto part companies.
ORLY is one such company. According to their company website, "O'Reilly Automotive, Inc. is one of the largest specialty retailers of automotive aftermarket parts, tools, supplies, equipment, and accessories in the United States, serving both professional service providers and do-it-yourself customers. Founded in 1957 by the O'Reilly family, the Company operated 4,257 stores in 42 states as of June 30, 2014."
One analysts on Wall Street called ORLY a "well-oiled machine." It's easy to see why. The company has delivered four years of consistent double-digit earnings growth. Steady same-store sales are impressive considering the tough retail environment we've seen over the last few years. The company's margins are expected to grow over the next 12-18 months. ORLY is on track to open 200 new stores in 2014.
They have also boosted their stock buyback program. On August 13th ORLY announced an additional $500 million, which bumps their total stock repurchase program to $4.5 billion.
Technically shares have been consistently bouncing off their long-term trend of higher lows (on the weekly chart below). ORLY did spent the last few months consolidating sideways but it has started to breakout past resistance. This is our chance to hop on board. A rally past $158.00 could create a new point & figure chart buy signal.
Tonight we are suggesting a trigger to buy calls at $157.50. We're listing the October $160 call. You may want to consider a longer-dated option (like the Novembers or 2015 Januarys).
Trigger @ $157.50
- Suggested Positions -
Buy the Oct $160 call (ORLY141018C160) current ask $2.50
Option Format: symbol-year-month-day-call-strike