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TheStreet Open House

Beat the S&P With 5 Stocks Everyone Else Hates

Stocks in this article: AZOCRMWMPAYXICE

AutoZone

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AutoZone ( AZO) is enjoying a strong year in 2013. Shares of the auto parts retailer have more or less matched the market, but record profitability continues to pile onto the fundamental argument behind shares. AZO owns a network of more than 4,600 stores here in the U.S., and another 321 in Mexico, making it the largest aftermarket car part seller in North America. That hasn't saved AZO from a short interest ratio of 10.38.

>>5 Stocks Set to Soar on Bullish Earnings

Autozone has enjoyed some big economic tailwinds in recent years. As I write, the average car on the road is older than it's ever been before, and an aging national car fleet is fuelling more car part sales as consumers try to extend the lives of their vehicles. The firm's business isn't relegated to Do-It-Yourselfers -- AutoZone also boasts more than 3,000 commercial locations in its retail stores, providing parts for repair shops and service stations. Obviously, margins on the commercial side of the business don't match the profitability that AZO enjoys on the retail side, but volumes help make up for the shortfall.

Success in Mexico has been another welcome tailwind. As with the U.S., Mexican cars are expected to last longer than ever before, and aftermarket parts are enjoying strong demand. More importantly, a presence in Mexico opens up the possibility for more locations in the lucrative Latin American market -- and the firm's entrée into Brazil is a big next step. Once Latin American operations mature, it could mean leaps and bounds for AZO's financial performance, but a short squeeze isn't likely to take that long.

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