That is why the auto parts store sector is booming. As it turns out, there are two companies in that sector that fit my criteria for low PEG low volatility investments.

First is O'Reilly Automotive ( ORLY). As of Dec. 31, 2011, the company operated 3,740 stores in 39 states. There is certainly room for O'Reilly to broaden its penetration into existing states and to expand to other states.

Earnings are expected to increase 22% in 2012 and 15% in 2013. The stock currently sells at 22 times current years' earnings estimates, implying a PEG of about 1.0. The one year historical volatility is 22.79%.

O'Reilly shows up on a list of the 10 Longest-Held Stocks of Top-Rated Mutual Funds.

The other stock in this theme is AutoZone ( AZO), the auto repair and parts chain that Eddie Lampert helped to turn around. Of course, as successful as he had been with AutoZone, he has failed with Sears Holdings ( SHLD), but linking those two companies may just be the next step. Sears Holdings is looking to monetize its Diehard brand of products and potentially its Sears Automotive business.

AutoZone is expected to grow earnings by 19% in 2012 and 16% in 2013. The stock currently sells at 17 times current year's earnings estimates making its PEG ratio very low. The one year historical volatility for AutoZone is 18.39%, which implies below market price stability for the stock.

As of the most recently reported quarter, AutoZone is also one of the top holdings at Steve Mandel's Lone Pine Captial.


Kroger ( KR) is one of the nation's largest supermarket chains, operating about 2,500 stores under the Kroger and other brand names. Furthermore, this Cincinnati-based company operates fuel centers, convenience stores, financial services and the mall-based Littman Jewelry chain. Taken together, Kroger is one of the world's largest retailing companies.

>>5 Stocks That Make for Healthy Investments

Make no mistakes, retailing is a hard enough business, supermarket retailing is even harder, but Kroger has mastered the management of supermarkets. Earrings are expected to rise 16% in 2012 and slow down to 7% in 2013, and the company has bettered analysts' estimates in each of the last four quarters by an average of 3 cents per quarter. The stock sells for only about 10 times current year's estimates. The one-year historical volatility for Kroger is 21.50%.

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