Mr. Blaeser: We are a full-service investment banking firm that provides financial advisory and capital raising services in the U.S., Asia and Europe. Our services include mergers and acquisitions advice, restructuring advice, private placements, and public offerings of debt and equity. Morgan Joseph also provides a full range of sales and execution services, including equity research and specialized reports.
TWST: Within the automotive sector, which companies do you cover specifically?
Mr. Blaeser: I cover Advance Auto (AAP) and Pep Boys (PBY).
TWST: What is the status of the sector right now?
Mr. Blaeser: I believe the automotive aftermarket is actually expanding and
seeing some benefits from current economic challenges. The automotive
aftermarket has and is considered a recessionary-resistant space. While not
immune to economic weaknesses, it has benefited from recessionary times due to
fewer new car sales, year-over-year decreases in gasoline prices and consumers
seeking lower cost, either doing it yourself (DIY) or do it for me (DIFM)
options. Prior to the recession, trends have been for an expanding average age
of vehicles. I believe the year-over-year declines in new car sales that we have
experienced these past two years is further expanding that average vehicle age
and potentially providing a benefit to the automotive aftermarket. AutoZone
(AZO) likes to refer to these aging vehicles, cars in the 8- 9- and 10-year- old
range, as OKVs - "our kind of vehicles." As cars age, the wear and tear of the
parts increases, and so to does the need for maintenance. 2009 has started off
well for the automotive aftermarket. Despite a similar economic background, 2008
was a more challenging period, as consumers initially deferred some maintenance
and limited discretionary purchases. Another headwind in 2008 was the higher
price of gasoline. At $4 a gallon, miles driven decreased, which often
correlates to fewer miles driven. Two key metrics that people look at are miles
driven and also the average age of vehicles.
Tickers included in this excerpt: AAP, AZO, ORLY, PBY
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