Is O'Reilly Automotive (ORLY) a Defensive Stock?

Qualivian Investment Partners, an investment partnership focused on long-only public equities, released its Q1 2025 investor letter. A copy of the letter can be downloaded here. The fund outperformed the iShares MSCI USA Quality Factor ETF (QUAL) by 66.0% and 59.4% on a gross and net basis, since inception through March 31, 2025. It also exceeded the S&P 500 by 32.7% and 26.1% respectively, on a gross and net basis. In Q1 2025, the fund outperformed QUAL by 5.3% and 5.2% on a gross and net basis, and we outperformed the S&P 500 by 5.2% and 5.1% on a gross and net basis. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Qualivian Investment Partners highlighted stocks such as O’Reilly Automotive, Inc. (NASDAQ:ORLY). O’Reilly Automotive, Inc. (NASDAQ:ORLY) is a retailer and supplier of automotive aftermarket parts, tools, supplies, equipment, and accessories. The one-month return of O’Reilly Automotive, Inc. (NASDAQ:ORLY) was -1.37%, and its shares gained 33.02% of their value over the last 52 weeks. On June 30, 2025, O’Reilly Automotive, Inc. (NASDAQ:ORLY) stock closed at $90.13 per share, with a market capitalization of $77.047 billion.

Qualivian Investment Partners stated the following regarding O’Reilly Automotive, Inc. (NASDAQ:ORLY) in its Q1 2025 investor letter:

"In part as a result of this sector rotation, our top 3 contributors in the quarter were O’Reilly Automotive, Inc. (NASDAQ:ORLY), Berkshire Hathaway (BRK.B), and Arthur J. Gallagher (AJG).

ORLY is the second-largest automotive parts retailer. 80%–85% of its revenues are in non discretionary automotive parts (products required for maintenance and/or repair of cars) and as such is viewed as somewhat of a defensive play, especially given the aging car fleet in the United States. Furthermore, ORLY had fared well during the COVID-driven supply chain shortages in 2021 and 2022, proving that it could pass along any inflation in the goods that it sourced on to the end consumer. The market rewarded ORLY for its defensiveness."

O’Reilly Automotive, Inc. (NASDAQ:ORLY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held O’Reilly Automotive, Inc. (NASDAQ:ORLY) at the end of the first quarter, which was 63 in the previous quarter. While we acknowledge the potential of O’Reilly Automotive, Inc. (NASDAQ:ORLY) 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 undervalued AI stock set for massive gains.

In another article, we covered O’Reilly Automotive, Inc. (NASDAQ:ORLY) and shared the list of best consumer cyclical stocks to buy. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of ORLY 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.

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