O’Reilly Automotive, Inc. (NASDAQ: ORLY) has led the way providing mechanics and do-it-yourself customers with aftermarket parts, tools, supplies and equipment for more than half of a century. The Missouri-based company, founded in 1957, has roughly 5,000 stores, with plans to open an additional 200 stores throughout 2018 in both new and existing markets. (See also: What Types of Companies Are in the Automotive Sector Besides Auto Manufacturers?)
O’Reilly Automotive's stock price hasn't looked back since breaking above a significant 12-month resistance level at $290 in July 2018, when the company reported better-than-expected 2018 second-quarter earnings. "We are very pleased to report another profitable quarter, highlighted by a solid 4.6% increase in comparable store sales, which exceeded the top of our guidance range for the second quarter," said Greg Johnson, O’Reilly's CEO and co-president, as reported by MarketWatch.
The specialty auto retailer also remained popular with institutional investors during the quarter. Bronfman E.L. Rothschild L.P. increased its stake in O'Reilly Automotive by 4.8%, while Manhattan-based Oppenheimer Asset Management Inc. grew its position in the company by 2.7%.
Investors who want exposure to O'Reilly Automotive should consider adding one of these three exchange-traded funds (ETFs) to their portfolio. (For more, see: 4 Stocks to Outperform in an Anti-FAANG Portfolio.)
Created in 2006, the Invesco DWA Consumer Cyclicals Momentum ETF aims to track the performance of the DWA Consumer Cyclicals Technical Leaders Index. The fund achieves this by investing the lion's share of its assets in securities that make up the underlying index. This includes U.S. consumer cyclical stocks that are showing price momentum. O'Reilly Automotive commands the ETF's second top weighting at 5.64%. Amazon.com, Inc. (NASDAQ: AMZN), the world's largest e-commerce and cloud computing company, takes up the fund’s top allocation at 5.85%, while Ross Stores, Inc. (NASDAQ: ROST) also features prominently with a weighting of 5.53%.
The Invesco DWA Consumer Cyclicals Momentum ETF has assets under management (AUM) of $68.63 million and a 0.6% expense ratio. Management fees are, however, mostly offset by the fund’s 0.51% dividend yield. As of August 2018, PEZ has five-year and three-year annualized returns of 7.88% and 4.65%, respectively. Year to date (YTD), the fund has returned an impressive 9.34%. (See also: Why These 4 Retailers are Amazon-Proof.)
The Invesco DWA Momentum ETF, which launched in 2007, seeks to provide similar returns to the Dorsey Wright Technical Leaders Index. To do this, the fund invests at least 90% of its asset pool in securities that are constitutes of the benchmark index. The ETF's basket holds 100 large- and mid-capitalization companies that are weighted by relative stock price performance. The fund allocates 2.99% of its portfolio to O’Reilly Automotive. Other top holdings include Apple Inc. (NASDAQ: AAPL) and Domino's Pizza, Inc. (NYSE: DPZ).
The Invesco DWA Momentum ETF has an annual management fee of 0.63%, which is higher than the 0.45% category average. It is much larger than PEZ, with $1.55 billion in net assets. This below-average-risk-rated fund has returned 11.74% over the past five years and 8.88% over the past three years. Investors have enjoyed a YTD return of 8.9% as of August 2018. PDP pays a 0.22% dividend yield. (To learn more, see: What Technical Tools Can I Use to Measure Momentum?)
The VanEck Vectors Retail ETF (NYSEARCA: RTH), formed in December 2011, attempts to replicate the performance of the MVIS US Listed Retail 25 Index. It does this by investing the majority of its assets in securities, such as stocks and American depository receipts (ADRs), that reflect the tracked index. The fund holds companies that generate at least half of their revenue from retail. RTH provides exposure to O'Reilly Automotive through its 2.44% allocation to the stock. Amazon is the fund's largest holding with a weighting of 20.8%. In total, the fund's basket holds 25 stocks.
The VanEck Vectors Retail ETF has AUM of $94.94 million and charges investors a low annual 0.35% management fee. It pays a dividend yield of 1.39%. RTH has a five-year annualized return of 14.81% and a three-year annualized return of 11.38%. The fund's YTD return of 12.75% is outperforming the Standard and Poor’s 500 index (S&P 500) by almost 4% over the same period as of August 2018. (For additional reading, check out: The Four Rs of Investing in Retail.)