Here's Qualivian Investment Partners' Investment Thesis for AutoZone (AZO)

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 AutoZone, Inc. (NYSE:AZO). AutoZone, Inc. (NYSE:AZO) is a retailer of automotive replacement parts and accessories. The one-month return of AutoZone, Inc. (NYSE:AZO) was 0.04%, and its shares gained 30.71% of their value over the last 52 weeks. On July 1, 2025, AutoZone, Inc. (NYSE:AZO) stock closed at $3,718.59 per share, with a market capitalization of $62.207 billion.

Qualivian Investment Partners stated the following regarding AutoZone, Inc. (NYSE:AZO) in its Q1 2025 investor letter:

"AutoZone, Inc. (NYSE:AZO) is an oligopolist in a simple and understandable industry with high barriers to entry. It has a predictable high free cash flow-generative business. It has forecastable long-term growth. It has rational competition. It has pricing power. It has a consistent operating history of double-digit EPS growth. It has high returns on capital. It has a management team that is honest and focused on maximizing shareholder value. It has a reasonable valuation.

AZO is a leading retailer of aftermarket automotive parts in the USA. It has 6,400 stores serving the Do-It-Yourself (DIY) and Commercial/Do-It-For-Me (DIFM) segments. It also has 900 stores outside the USA…” (Click here to read the full text)

AutoZone, Inc. (NYSE:AZO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held AutoZone, Inc. (NYSE:AZO) at the end of the first quarter, which was 56 in the previous quarter. AutoZone, Inc.'s (NYSE:AZO) total sales were $4.5 billion in the third quarter of fiscal 2025, reflecting a year-over-year increase of 5.4%. While we acknowledge the potential of AutoZone, Inc. (NYSE:AZO) 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 AutoZone, Inc. (NYSE:AZO) and shared the list of stocks Jim Cramer recently discussed. 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 AZO 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.