Broad Run Investment Management just published it's second quarter 2017 investor letter.
The letter discusses two positions: NVR Inc. (NVR) O'Reilly Automotive (ORLY)
You can find the full letter here:
Some commentary on auto parts retailers whose stocks have been hit hard recently on disappointing results and fears about competitive pressure by Amazon:
We continue to believe the aftermarket auto parts distribution business is among the distribution/retail businesses most shielded from competition from Amazon. The commercial side (do-it-for-me, “DIFM”) of the business (42% of O’Reilly’s sales) requires “hot shot” delivery (mechanics generally expect to receive parts in 30-45 minutes) of more than a hundred thousand different SKUs. This is challenging without a significant store level, hub store level, and distribution center level inventory investment. It is difficult for Amazon to stock that much slow turning inventory close to the customer without a substantial brick and mortar investment and without a large base of commercial business. Much of the retail do-it-yourself (“DIY”) side of O’Reilly’s business (58% of sales) is immediate/same day need in nature, requires significant customer service (help with finding the right part, diagnosing the problem), has a large portion of customers that pay in cash, and involves frequent product returns.
Importantly, the availability of highly discounted auto parts online or from a catalog is not a new phenomenon. Rockauto has been around since 1999. Amazon entered the auto parts business in 2006. Before the existence of online competition, catalogs offered price discounts relative to brick and mortar stores. We acknowledge that the online/catalog channel presents a better value proposition for a small portion of DIYers that do not require assistance and do not need the part immediately.