In just over four weeks, the stock market year 2022 will be history. A lot can still happen during this time. But it would take a spectacular year-end rally to turn the balance into positive territory. This applies to the technology segment in particular. The NASDAQ-100 index is heading into the home stretch with a 29% discount relative to the 2021 year-end. As always, there are stocks that have managed to escape the negative environment. Among the top 10 of the annual ranking for the U.S. technology benchmark, O'Reilly Automotive makes it with a price gain of 21% to date. The name alone shows that this is not a typical NASDAQ stock. Founded 55 years ago, the company describes itself as a leading distributor of automotive aftermarket parts in the US. At the end of 1992, the O'Reilly family made the decision to go public on NASDAQ. On April 22 of the following year, the stock made its debut on the technology exchange.
What started with a small store in Missouri has grown into a network of more than 5,900 U.S. stores. In Mexico, the group operates a further 28 outlets under the ORMA brand. Private and commercial customers can obtain everything they need to repair and maintain a car there - the range extends from batteries and alternators to body parts and engine oils. Business is booming: in 2021, O'Reilly posted record sales of a good USD 13.3 billion. The company also achieved a record operating profit of around USD 2.9 billion (see chart). The management team around CEO Greg Johnson describes traffic volumes as a long-term growth driver. After the Corona-related slump, Americans were back on the roads and highways in 2021. Total miles traveled increased by 11.2%. Despite rising fuel costs, total miles traveled was up slightly again in the first eight months of 2022.
Speaking of inflation, general cost pressures are not stopping at O'Reilly Automotive. As a result, the company is unable to maintain the top level of profitability it achieved last year, although the CEO recently adjusted the forecast upward: Sales are expected to grow between 4.5% and 5.5% on a comparable basis in 2022. At the same time, Johnson expects an operating margin of between 20.3% and 20.6%. At the upper end of this range, the ratio would shrink by 1.3 percentage points year-on-year. The outlook presented together with the quarterly report at the end of October was nevertheless well received on the stock market: Since then, the O'Reilly share has gained a good tenth in value. With these advances, the stock was able to further extend its outperformance both against the broad market and relative to the automotive sector. O'Reilly also shows a clear lead over Continental. The German automotive supplier has a strong presence in the parts market. A search of O'Reilly's online store using the keyword "Continental" results in 884 items.
The two companies are also a good fit as underlyings for a softcallable multi barrier reverse convertible (BRC). The CHF-denominated new issuance comes with a guaranteed coupon of 14% p.a.. Continental and O'Reilly start the one-year term with a barrier of 55% of the respective starting level. As long as no share falls to or below this level, Leonteq will transfer the full nominal amount on the redemption date. Also new to the market are two softcallable BRCs based on O'Reilly Automotive alone. In the product currency CHF, investors can expect a fixed coupon payment of 7% p.a. here. In the USD-denominated counterpart, the quarterly payout is 10% p.a.. The barrier is fixed at 69% of the initial share price for both single BRCs. Early termination and redemption is possible for all products presented due to the soft callable feature. Please also note: As soon as a barrier violation occurs, the partial protection expires. In this case, investors bear the price risk of O'Reilly or Continental, respectively, if the DAX share should turn out to be the weaker stock in the multi BRC.
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