Gold, bonds, even socking cash away — these and other approaches represent obvious defensive measures against an economic downturn. But an alternative and specialty parts store for the automobile and vehicular market? It sounds a little kooky at first until you get under the hood and that’s the opportunity at hand with LKQ Corporation (NASDAQ:LKQ).
Founded in 1998, LKQ has over the years expanded from its Chicago, Illinois headquarters thanks to its over 270 acquisitions. As such, the company has established a significant presence in North America, Europe and Taiwan. While the enterprise’s core products of recycled and aftermarket collision and mechanical parts have long been relevant, demand should pick up briskly in the years ahead.
Primarily, LKQ commands market leadership in a fragmented industry. As the dominant player in the alternative auto parts market, holding over a 70% market share in the North America region, LKQ represents the sector’s go-to entity. That’s an enviable status. And with its extensive network and scale, it’s unlikely to give up this leadership perch.
Just as significantly, LKQ stock should prove resilient to the present economic fluctuations. No, it’s not immune to downside pressure — no business is. However, in times of economic uncertainty, consumers are much more likely to repair existing vehicles than to purchase new ones. This fact alone should help keep the lights on.
LKQ will release its earnings results on Thursday before the opening bell. Speculators looking for a quick pop just might get it.
On average, many if not most publicly traded securities enjoy a slight upward bias. For LKQ stock, the chances that a long position will end positively over any given week comes in at just under 52%. That’s not really a practical edge but it shows that sentiment slightly favors the optimists.
However, it would be incorrect to say that 52% is the probability of all states or cycles of LKQ stock. Instead, the equity — like anything else — goes through multiple sentiment phases. The problem is that deciphering, let alone predicting when these transitions occur has long vexed market analysts. Subsequently, many experts have made the mistake of predicting price with price, erroneously assuming that price by itself has significant meaning (it does not).
To get around this analytical dilemma, I framed all of LKQ’s price discovery as a “genetic sequence” of 33 strings. Thanks to this process called abstraction — which involves the compression of continuous signals into discrete events — I am able to quantify and categorize market sentiment in a way that is impossible with technical or fundamental analysis.
Through this methodology, I uncovered that LKQ stock is currently riding in totality a 6-4 sequence: six up weeks, four down weeks, with an overall upward slant across the time period. This pattern features one-week long odds of nearly 60%, roughly eight percentage points of odds higher than the baseline. Plus, the median return under the positive pathway clocks in at 2%.
To be sure, a strong result this week would mean that the next week will see a 7-3 sequence, which tends to have relatively poor odds of upside success. At the same time, LKQ stock is heavily discounted from levels seen in July 2023. Therefore, this could be a discount hiding in plain sight.
