The Misfits: Dorman Products (DORM)

Lesson: Some of the best investments aren't the most commonly discussed ones in any given industry.

Autos in Beacon Hill Park, Victoria, BC, circa 1910, postcard

There’s something about finding under-the-radar or undercovered investments in industries with immense media attention that gives me a sense of perverse joy. It feels like being in on a secret few others are wise to.

The automotive industry is one such industry. You can’t swing a cat without hitting a sell-side analyst covering autos or a writer musing how Ford or General Motors are great buys right now.

The past 40 years of auto investing would suggest otherwise.

Even though the big auto manufacturers have been terrible investments for decades, a large group of companies on the periphery of automobiles have proven fantastic investments.

• Car and truck dealerships

• Scrap yards

• Used car lending

• Transporting vehicles to dealerships?

Another incredible place to find investments in the automotive industry is the parts that keep vehicles going. I could probably do several thousand words on automotive parts retailers AutoZone (NYSE: AZO) and O’Reilly Automotive (NASDAQ: ORLY), but the 90s kid in me says stocks with 29 Wall Street analysts covering them are “too mainstream” for a newsletter about obscure and underappreciated stocks. That’s like saying Nickelback is indie music.

Instead, let’s examine Dorman Products (NASDAQ: DORM), which has only four Wall Street analysts covering it. Like so many other great investments on the periphery of automotive, it has blown the doors off of the big-name automakers and the broader market.

Let’s dig in.

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