Portfolio in Brief—O’Reilly Automotive (ORLY)
O’Reilly Automotive is one of the largest auto parts retailers in North America. The company serves both customers who repair their own vehicles and professional garages. We like this business model because it is built around a simple and recurring need: maintaining and repairing vehicles that are already on the road.
In an environment where interest rates, new vehicle prices and insurance costs remain elevated, many consumers are keeping their vehicles longer. This directly supports demand for replacement parts and gives O’Reilly a more defensive profile than many other retailers.
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Recent Highlights
• Q1 2026 revenue: US$4.56 billion, up 10.2% year over year.
• Diluted earnings per share: US$0.72, compared with US$0.62 last year, an increase of 16%.
• Comparable store sales: +8.1%, well above expectations.
• Sales to professional garages and service providers: US$2.29 billion, up 14.6%.
• Sales to do-it-yourself customers: US$2.19 billion, up 6.7%.
• Operating margin: 18.5%, reflecting strong operating discipline.
• Total store count: 6,644, with a still modest but growing presence in Canada.
• New stores opened during the quarter: 59, confirming that the company continues to expand its network.
• Share repurchases: US$923 million in the first quarter, an important driver of earnings-per-share growth.
• 2026 outlook: expected revenue between US$18.7 billion and US$19.0 billion, with diluted EPS expected between US$3.15 and US$3.25.
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Why This Stock Is Worth Watching
O’Reilly is not a speculative stock or a market trend. It is an execution-driven company. Its model is built on parts availability, delivery speed, network density and strong relationships with garages.
The professional segment is especially attractive. Garages need reliable inventory, fast service and a supplier that can deliver efficiently. O’Reilly has built a strong competitive advantage in this area, which helps explain the strong growth in professional customer sales last quarter.
The company is also benefiting from a structural tailwind: the aging vehicle fleet. The longer vehicles stay on the road, the more maintenance they require. And because buying a new vehicle remains expensive for many households, this trend naturally supports demand for auto parts.
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Why We Started Buying the Stock
We recently started buying O’Reilly Automotive gradually and with discipline. The stock has already delivered strong long-term performance, but the fundamentals remain solid: comparable store sales growth, network expansion, strong professional segment momentum, high margins and meaningful share repurchases.
In our view, O’Reilly brings an attractive profile to a portfolio. It does not depend on a single product, a technology cycle or a short-lived market theme. It is a well-managed company operating in an essential sector, with a proven ability to create value over many years.
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Conclusion
O’Reilly Automotive represents the type of company we like to add when the market becomes more selective. The model is simple but highly effective: selling the parts needed to keep vehicles on the road.
Yes, the stock trades at a higher valuation than some of its peers. O’Reilly trades at roughly 35 times current-year earnings, compared with about 25 times for AutoZone and roughly 23 times for the average S&P 500 companies. In our view, that premium is justified by the quality of the company’s execution, its growth outlook and its share repurchase program. O’Reilly actively buys back its own stock and is on track to reduce its share count by more than 3% on average during the current fiscal year.
AutoZone may offer better relative value in the short term if its growth accelerates in 2026. That said, O’Reilly remains, in our view, a very high-quality business with consistent execution, a strong position with professional garages and an excellent ability to perform across different economic environments.
We have therefore started building a position in the stock. The objective is not to bet on a short-term move, but to gradually add a solid, profitable and well-positioned company that can continue creating long-term value.
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Markets in Brief
Monday
Dow Jones: 49,686.12 (+0.32%)
S&P 500:7,403.05 (-0.07%)
Nasdaq: 26,090.73 (-0.51%)
S&P/TSX: closed—Victoria Day
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Canadian Dollar
The Canadian dollar remained stable against the U.S. dollar. With Canadian markets closed for Victoria Day, investors were mainly focused on oil prices, U.S. bond yields and ongoing tensions in the Middle East.
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Macro Overview
Wall Street started the week on a cautious note. The Dow Jones finished slightly higher, while the S&P 500 and Nasdaq declined, weighed down by weakness in technology and semiconductor stocks.
Markets remain sensitive to rising bond yields and higher oil prices. The U.S. 10-year yield moved around 4.60%, while tensions between the United States and Iran continued to fuel inflation concerns. In this environment, investors reduced exposure to growth stocks that are more sensitive to interest rates.
Technology was the main weak spot of the session. After a strong run since the beginning of the year, several artificial intelligence-related names saw profit-taking. Investors are now waiting for Nvidia’s results on Wednesday, which could set the tone for the sector for the rest of the week.
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Stocks in Brief
• Micron (MU): -5.95%—Sharp decline in the memory segment, pressured by rising yields and profit-taking.
• Sandisk (SNDK): -5.30%—Pulled lower by weakness in memory and hardware-related technology names.
• Broadcom (AVGO): -1.05%—Slight decline in a more difficult session for AI infrastructure stocks.
• Dominion Energy (D): +9.44%—Strong gain after the announcement of its acquisition by NextEra Energy in a transaction valued at approximately US$66 billion. The deal would create a major electricity player well positioned to meet growing demand from data centers.
• NextEra Energy (NEE): -4.63%—Declined as investors digested the size of the announced acquisition.
• Regeneron Pharmaceuticals (REGN): -9.82%—Fell after disappointing results for an experimental skin cancer treatment.
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Tuesday
Dow Jones: 49,363.88 (-0.65%)
S&P 500:7,353.61 (-0.67%)
Nasdaq: 25,870.71 (-0.84%)
S&P/TSX: 33,741.24 (-0.27%)
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Canadian Dollar
The Canadian dollar remained under pressure, as higher U.S. yields and inflation concerns continued to support the U.S. dollar. Oil remained volatile but still elevated enough to keep investors cautious.
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Macro Overview
Markets extended their decline on Tuesday, still pressured by bond yields. The U.S. 30-year yield reached its highest level since 2007, while the 10-year yield climbed near 4.69%. Higher yields make equity valuations harder to support, especially in growth and technology stocks.
The geopolitical backdrop also remains important. The lack of clear progress in the Middle East conflict, combined with ongoing tensions around the Strait of Hormuz, continues to feed inflation concerns. Even though oil prices eased slightly, they remain elevated.
Investors are now waiting for Nvidia’s results, scheduled for Wednesday. As the stock has become a major barometer for enthusiasm around artificial intelligence, its results could influence the market’s direction for the rest of the week.
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Stocks in Brief
• Nvidia (NVDA): -0.8%—Pulled back ahead of its highly anticipated quarterly results. The market wants to see whether AI-related demand remains strong enough to support elevated expectations.
• Akamai Technologies (AKAM): -6.3%—Fell sharply after announcing plans to issue US$2.6 billion in convertible notes.
• Home Depot (HD): +0.87%—Finished higher after stronger-than-expected results. Management still acknowledged that households remain cautious in a more pressured economic environment.
• Shake Shack (SHAK): +7.38%—Rose strongly after several executives, including the CEO, bought shares.
• Standard Chartered: -2.2%—Declined in London after announcing plans to cut more than 7,800 jobs as the bank accelerates its move toward artificial intelligence and automation.
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Inflation Rises in Canada
Canadian inflation accelerated in April, mainly because of higher gasoline prices tied to tensions in the Middle East. The report is important for the Bank of Canada, but it does not completely change the picture: headline inflation is moving higher, while underlying pressure still appears relatively contained.
Key Numbers to Watch
• Canadian inflation: 2.8% in April, up from 2.4% in March.
• Quebec inflation: 3.0%, compared with 2.9% the previous month.
• Gasoline: +28.6% year over year, mainly because of higher oil prices.
• Energy: +19.2% year over year, after a much smaller increase in March.
• Inflation excluding gasoline: 2.0%, showing that most of the pressure came from fuel.
• Food inflation: +3.5%, down from 4.0% in March.
• Clothing and footwear: +2.0%, after declining in March.
• Travel tours: -11%, helping limit the overall increase in prices.
• Bank of Canada’s decision: June 10, with this report being one of the key data points to watch.
The increase in inflation is mainly coming from energy, not from a broad acceleration across the entire economy. That is why the Bank of Canada should remain careful before making any move on rates.
The main risk is that higher oil prices eventually feed into transportation costs, grocery prices, airline tickets and other consumer goods. For now, the report shows higher inflation, but still within a relatively controlled framework.
For markets, this kind of data keeps investors focused on bond yields. If inflation stays higher for longer, yields could remain under pressure, which would weigh especially on growth stocks. On the other hand, if the energy shock proves temporary, the Bank of Canada could continue to take a patient approach.
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U.S. Debt Costs Rise to Their Highest Level Since 2007
The cost of borrowing for the U.S. government has climbed back to levels not seen since the 2007 financial crisis. This move in bond yields is worrying markets because it raises borrowing costs for consumers, businesses and governments. It also puts pressure on growth stocks, especially in technology.
Key Numbers to Watch
• U.S. 30-year yield: 5.18%, its highest level since 2007.
• U.S. 10-year yield: 4.67% to 4.69%, a high since early 2025.
• 30-year yield before the first strikes in Iran: around 4.61%, showing how much yields have moved higher.
• 10-year yield before the conflict: 3.94%, compared with nearly 4.70% this week.
• Oil: around US$110 per barrel, adding to concerns about persistent inflation.
• Wall Street: lower on Tuesday, pressured by higher yields and inflation concerns.
• Global bond market: under pressure, with yields also rising in Europe and the United Kingdom.
The rise in yields is mainly tied to inflation concerns linked to oil prices and the conflict in the Middle East. The longer energy prices stay elevated, the more investors worry that inflation could remain high for longer. As a result, they are demanding higher returns to lend money over the long term.
For the economy, higher yields make mortgages, car loans, credit cards and business financing more expensive. That can slow household spending and delay corporate investment projects.
For markets, this is an important factor to watch. Higher yields make bonds more attractive and reduce the relative appeal of equities, especially growth and technology stocks. That is why investors are closely watching oil prices, inflation and the Federal Reserve’s next comments.
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Wednesday
Dow Jones: 50,009.35 (+1.31%)
S&P 500:7,432.97 (+1.08%)
Nasdaq: 26,270.36 (+1.54%)
S&P/TSX: 34,161.82 (+1.25%)
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Canadian Dollar
The Canadian dollar strengthened slightly, trading around 72.72 cents US, compared with 72.69 cents US on Tuesday. The drop in oil prices limited the loonie’s momentum, but lower U.S. bond yields and a softer U.S. dollar helped support the currency.
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Macro Overview
Markets rebounded sharply on Wednesday, erasing the losses from Monday and Tuesday. The move was driven by hopes of progress in negotiations between the United States and Iran. Donald Trump’s comments that talks were entering their “final stages” pushed oil prices lower and eased some inflation concerns.
The drop in oil also helped bond yields move lower. The U.S. 10-year yield declined to around 4.57%, from 4.67% on Tuesday, while the 30-year yield moved down from about 5.18% to 5.11%. This gave markets some breathing room, especially growth stocks and rate-sensitive sectors.
The TSX also benefited from the return of risk appetite, closing up more than 420 points. WTI crude for July delivery fell US$5.89 to US$98.26 per barrel, while gold rose US$24.10 to US$4,535.30 per ounce.
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Stocks in Brief
• Nvidia (NVDA): +1.30% — The stock gained ahead of its earnings release after the close. Investors were looking for another confirmation of strong demand tied to artificial intelligence
• United Airlines (UAL): +9.99%—Jumped as lower oil prices supported airline stocks.
• Delta Air Lines (DAL): +9.39%—Also benefited from the sharp drop in crude prices, which could ease fuel cost pressure.
• Carnival (CCL): +8.98%—Cruise stocks rebounded alongside travel-related names, helped by lower oil prices and improved market sentiment.
• Norwegian Cruise Line (NCLH): +8.42%—Rose in the same broader recovery across travel stocks.
• Target (TGT): -3.84%—Fell despite better-than-expected results and raised guidance, showing that investors remain demanding toward retailers.
• Hasbro (HAS): -8.83%—Dropped sharply despite stronger-than-expected results, as the market remained cautious about the quality of future growth.
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Thursday
Dow Jones: 50,285.66 (+0.55%)
S&P 500: 7,445.72 (+0.17%)
Nasdaq: 26,293.10 (+0.09%)
S&P/TSX: 34,409.49 (+0.73%)
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Canadian Dollar
The Canadian dollar edged lower, trading around 72.55 U.S. cents, compared with 72.72 U.S. cents on Wednesday. The decline in oil prices limited the usual support for the loonie, even though the broader market tone remained constructive.
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Macro Analysis
Markets closed higher on Thursday in a session still largely driven by oil prices, bond yields and hopes for a potential agreement between the United States and Iran. The Dow Jones reached a new closing high above the 50,000-point mark, while the S&P 500 and Nasdaq also finished in positive territory.
Oil prices declined despite a volatile session. WTI fell nearly 2% to US$96.35 per barrel, while Brent ended at US$102.58. Investors continued to price in the possibility of diplomatic progress in the Middle East, which helped ease inflation concerns.
Bond yields also moved during the session. After rising earlier in the day, the U.S. 10-year yield finished around 4.56%, while the 30-year yield moved back near 5.09%. This easing in yields supported equities, although markets remain sensitive to the risk of more persistent inflation if oil stays near or above US$100.
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Nvidia: Strong Results, but Expectations Remain Very High
Nvidia once again beat market expectations, both on earnings and guidance. The company also announced an increase in its quarterly dividend to US$0.25 per share, a sign of the strength of its cash flows.
Still, the stock fell by about 1.8%. The decline was not driven by weak results, but rather by the fact that expectations had become extremely elevated. With Nvidia, investors are no longer looking only for a strong quarter: they want a major beat and even greater visibility on artificial intelligence demand.
The stock remains a key barometer for the AI theme. As long as spending on AI infrastructure remains strong, Nvidia maintains a strategic role in the market. But after a significant rally in the share price, the margin for error has become much narrower.
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Stocks in Brief
• Nvidia (NVDA): -1.8% — the stock declined despite stronger-than-expected results and solid guidance. The market had already priced in a significant amount of optimism around artificial intelligence, which explains the negative reaction despite the quality of the numbers.
• Walmart (WMT): -7.3% — the stock dropped after the company reported results. Although revenue came in above expectations, earnings guidance for the next quarter disappointed. Investors interpreted the outlook as a cautious signal on the health of the U.S. consumer and ongoing cost pressures.
• Spotify (SPOT): +13.1% — the stock surged after the company announced an agreement with Universal Music around AI-generated music features. Investors also welcomed the company’s new long-term targets, including annual revenue growth in the mid-teens and a targeted gross margin between 35% and 40%.
• Intuit (INTU): -20.0% — the stock fell sharply after earnings, as investors reacted negatively to a more cautious outlook. Concerns were mainly focused on key businesses such as TurboTax and QuickBooks, in a context where expectations were already high.
• e.l.f. Beauty (ELF): +4.7% — the stock advanced after better-than-expected results. Quarterly revenue rose 35% to US$449.3 million, ahead of expectations. However, the company’s fiscal 2027 earnings outlook remained below consensus, limiting enthusiasm.
• Costco (COST): -2.2% — the stock underperformed despite the broader market’s positive tone. The decline came amid pressure on parts of the retail sector, as investors reassessed consumer-sector valuations following Walmart’s weaker outlook.
• Gold — gold continued to advance, gaining US$7.20 to US$4,542.50 an ounce. The move suggests that some caution remains in the market, despite the gains in major equity indices.
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Friday — Session in Progress
Dow Jones: +0.7%
S&P 500: +0.5%
Nasdaq: +0.5%
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Weekly Conclusion
The week is ending on a positive note for markets. After a more nervous start, driven by higher bond yields, oil volatility and tensions in the Middle East, the major indices managed to regain momentum.
The pullback in Treasury yields gave markets some breathing room, while solid corporate earnings, especially in technology, continued to support investor sentiment. The Dow Jones is trading near new highs, the S&P 500 is on track for another weekly gain, and the Nasdaq remains supported by continued enthusiasm around artificial intelligence.
Overall, despite a still volatile backdrop, markets are showing strong resilience. As long as yields stabilize and oil remains under control, the environment remains constructive for high-quality companies able to deliver solid results and sustainable growth.
