Should You Invest in Advanced Auto Parts (AAP)?

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Investment management company Cove Street Capital recently released its “Small Cap Value Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund returned -10.77% (net of fees) compared to -3.28% for the Russell 2000 Index and -3.64% for the Russell 2000 Value Index. For the first half of 2024, the S&P 500 is up 15%. Its biggest component, Nvidia, has increased by 150% over that time. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Cove Street Capital Small Cap Value Fund highlighted stocks like Advance Auto Parts, Inc. (NYSE:AAP) in the second quarter 2024 investor letter. Based in Raleigh, North Carolina, Advance Auto Parts, Inc. (NYSE:AAP) is an automotive replacement parts and accessories provider. The one-month return of Advance Auto Parts, Inc. (NYSE:AAP) was -9.53%, and its shares lost 16.98% of their value over the last 52 weeks. On July 10, 2024, Advance Auto Parts, Inc. (NYSE:AAP) stock closed at $58.74 per share with a market capitalization of $3.502 billion.

Cove Street Capital Small Cap Value Fund stated the following regarding Advance Auto Parts, Inc. (NYSE:AAP) in its Q2 2024 investor letter:

“We have three new more material positions added in the quarter. Advance Auto Parts, Inc. (NYSE:AAP) is the third wheel in a very profitable industry of retail/commercial selling of replacement auto parts. Autozone and O’Reilly have shown how to do this well whereas AAP has shown how NOT to. We think new management, a new Board, and a fiendishly simple strategic plan is a path toward a double in the stock price. We consider the downside here to be boredom if the “fiendishly simple” part proves to be more durable than we anticipate.”

A manufacturing facility floor filled with an array of automotive parts and accessories.

Advance Auto Parts, Inc. (NYSE:AAP) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held Advance Auto Parts, Inc. (NYSE:AAP) at the end of the first quarter which was 32 in the previous quarter. The Q1 performance of Advance Auto Parts, Inc. (NYSE:AAP) fell short of expectations and its net sales decreased by 0.3% in the quarter to $3.4 billion compared to Q1 2023 (see the details here). While we acknowledge the potential of Advance Auto Parts, Inc. (NYSE:AAP) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

We discussed Advance Auto Parts, Inc. (NYSE:AAP) in another article and shared the list of stocks Michael Burry has 42% of his portfolio invested in. Third Point Management expressed its positive outlook on Advance Auto Parts, Inc. (NYSE:AAP) in its Q1 2024 investor letter.  In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.