Peridot Capitalist Examines AutoZone (AZO)

AutoZone Inc. (NYSE:AZO) shares are up 6% in 2010 and now trading just $2 away from its 52-week high just under $170 a share.  To examine if the stock can keep trending higher we turn to Chad Brand the Peridot Capitalist.

(Peridot Capitalist) In today’s economic and financial market climate investors have to balance a stock market that is no longer cheap and an economy that has obvious structural damage. The consensus has concluded that below-average economic growth and employment could be with us for at least several more years. Given such circumstances we must be even more careful than usual in selecting companies to invest in.

In my mind, there are four things investors should look for when choosing new investments today. The first, valuation, is the obvious one for me as a value investor. No matter how much you like the story behind a stock, if you do not pay a fair price, the odds are stacked against you if you are trying to beat the market.

With so many economic headwinds, however, investors are likely to find their fair share of inexpensive stocks. Three other factors that I think are important, in no particular order, are:

1. A predictable and stable business outlook

There is no doubt that we are currently experiencing a fragile economic recovery. Any numbers of things could reverse the trend of the last several quarters and undo much of the progress that has been made. As a result, investors should focus on businesses where the outlook is predictable and relatively stable. This will make it fairly unimportant if GDP grows by a lot, a little, or not at all.

2. A strong market position that faces very few, if any, competitive threats in the near to intermediate term

A predictable and stable overall business outlook is great, but if a particular company is unable to successfully navigate and compete in that business, it could still falter. Not only must end demand be predictable, but the company’s own market position within that market is crucial as well.

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SOURCE: http://www.peridotcapitalist.com/2010/03/autozone-ripe-for-investment-at-the-right-price.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+PeridotCapitalist+%28peridotcapitalist+dot+com%29