Should You Invest in Advanced Auto Parts (AAP)?

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.

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