Genuine Parts: A Play on Rising Vehicle Prices

 

A look at one way to profit off of higher new and used car prices

 


Car prices have soared by double-digit rates due to production issues and a lack of used cars available.

Genuine Parts sells the parts needed for car owners to keep their vehicles running.

Shares are on the pricey side, but the company has a strong leadership position in its industry and one of the longest dividend growth streaks.

 

Anyone in the market for a new or used car is likely facing some sticker shock as the prices have increased drastically.

 

New car prices had increased 12.1% from the prior year in September, according to Kelley Blue Book, to an average of more than $45,000. The used car market isn’t much better as prices for this category are up nearly 40% since March 2020, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index.

 

Production issues, some of which is due to the Covid-19 pandemic, have put a lid on the number of new cars in production. The pre-owned market has likely been impacted by people being loath to turn in their current vehicle when a new one might not be available.

 

It is quite possible that the age of a vehicle in the U.S. will rise from its current average of 12 years.

 

The increases in new and used vehicles combined with an already high average age of ownership could be a tailwind to those companies that supply the parts to keep cars running longer.

 

 

This is where a company like Genuine Parts Co. (GPC, Financial) can see a material benefit to its business.

 

Let’s look at Genuine Parts to determine why it could be a good play on rising automotive aftermarket sales.

 

Continue reading …

 

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