Cramer picks O’Reilly to capitalize on GM, Chrysler closings

Eric Olson, SBJ Editor“Mad Money” host Jim Cramer recently recommended O’Reilly Automotive Inc. stock.

Is it a blessing or a curse?

Cramer talked for a few minutes on his May 15 CNBC show about O’Reilly (Nasdaq: ORLY) stock before lumping them in with Monroe Muffler Brake Inc. (Nasdaq: MNRO) as his “likes.” Watch the clip. (Tip: Cramer begins talking about O’Reilly five minutes in.)

O’Reilly stock quickly began moving. It opened Friday at $34.88 and closed at $36.84.

In the days following, word spread about Cramer’s latest favorite stock, and O’Reilly shares climbed some more. It peaked at $38.09 on May 20. Traders have since settled down, and shares closed May 21 at $36.09. Comparatively, its 52-week high, hit in late April, is $40.50.

Is Cramer a blessing or a curse? So far, just a quick spike, but Wall Street will have more to say when hundreds of dealerships begin closing.

Cramer’s point is well taken. With imminent closings of Chrysler and General Motors dealerships, smaller automotive shops will get the repair jobs normally gobbled up by the dealer mechanics. Those small shops order parts from O’Reilly and Monroe.

Furthermore, Cramer says that O’Reilly has stores in 80 percent of the markets where Chrysler dealerships are closing.

And in Cramer’s opinion, O’Reilly is in better position to play the dealership closings than auto-parts competitors AutoZone and Advance Auto Parts, because O’Reilly’s acquisition of CSK provides greater expansion potential.

“Don’t watch O’Reilly, buy the stock,” he closes out the TV segment.

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