Advance Auto Parts (AAP) Showed Positive Signs of Turnaround

Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund returned 8.60% compared to a 4.97% return for the Russell 2000 Value Index. Moreover, the Fund returned 5.87% YTD, compared to -3.16% for the index. Additionally, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its second-quarter 2025 investor letter, FPA Queens Road Small Cap Value Fund highlighted stocks such as Advance Auto Parts, Inc. (NYSE:AAP). 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 -13.76%, and its shares lost 6.92% of their value over the last 52 weeks. On August 18, 2025, Advance Auto Parts, Inc. (NYSE:AAP) stock closed at $56.60 per share, with a market capitalization of $3.395 billion.

FPA Queens Road Small Cap Value Fund stated the following regarding Advance Auto Parts, Inc. (NYSE:AAP) in its second quarter 2025 investor letter:

"Advance Auto Parts, Inc. (NYSE:AAP) is an auto parts distributor that sells to both professional repair technicians and retail customers. The company is struggling through a difficult turnaround and sits firmly in our “opportunistic value” bucket. But the balance sheet is in good shape, new management has articulated a credible restructuring plan and the company’s mid-term guidance for 7% operating margins is reasonable compared to competitors and Advance Auto’s own history. On May 22, 2025, the company reported positive operating results indicating that the turnaround is starting to gain traction and the stock has rebounded."

Advance Auto Parts, Inc. (NYSE:AAP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Advance Auto Parts, Inc. (NYSE:AAP) at the end of the first quarter, which was 43 in the previous quarter. Advance Auto Parts, Inc. (NYSE:AAP) reported $2 billion in net sales from continuing operations, an 8% decline compared to last year. While we acknowledge the potential of Advance Auto Parts, Inc. (NYSE:AAP) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Advance Auto Parts, Inc. (NYSE:AAP) and shared the list of stocks Jim Cramer discussed recently. In addition, please check out our hedge fund investor letters Q2 2025 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.