Whenever a stock can rev up to outperform the broader market, even in a single session, that can be a signal of institutional support that can lead to bigger gains. 

On June 21, O’Reilly Automotive Inc. (NASDAQ: ORLY) advanced 2.23% in volume which was 15% heavier than average. O’Reilly was the biggest percentage gainer within the consumer discretionary sector, as tracked by the Consumer Discretionary Select Sector SPDR Fund (NYSEARCA: XLY). The sector ETF itself was down 1.20% in the session, while the broader S&P 500 declined 0.52%.

If a stock rises, particularly in heavy volume, while the broader sector or market is down, indicates that one or more institutional buyers are accumulating shares in that particular stock. 

More Buying Than Selling Lately

Although MarketBeat’s O’Reilly Automotive institutional ownership data indicate more selling than buying in the past 12 months, that trend may be reversing. The stock’s up/down volume ratio is 1.3, indicating that buyers have been in charge in the past 50 sessions. 

Take a look at the O’Reilly Automotive chart, using either a bar or candlestick setting to get a granular view. That shows the stock’s base, which began in mid-May as O’Reilly retreated from a high of $964.58. 

The current base has corrected just 9% from peak to trough so far, an indication of mild selling rather than a race to the exits.

How Are Competitors Doing?

Compare O’Reilly’s chart with that of rival Autozone Inc. (NYSE: AZO), whose current base has corrected 17% so far. Autozone, like O’Reilly, has been performing better in recent weeks, etching the right side of its structure. 

Autozone gapped down hard after its most recent earnings report, although as reported previously by MarketBeat, that post-earnings pullback may have set the stock up for further gains, as more value-minded investors drove in. 

When you’re evaluating a stock, it’s worth seeing how its competitors and industry peers are performing. While Autozone and O’Reilly are on similar trajectories, Advance Auto Parts Inc. (NYSE: AAP) has careened off the road in a one-car crash. 

Earnings declined 80% year-over-year, while revenue grew at a rate of 1%. As MarketBeat’s Advance Auto Parts earnings data reveal, the company missed top and bottom-line views in the most recent quarter. It missed earnings views by a long shot, actually, coming in $1.88 short. That’s not something investors take kindly, and the stock gapped down 35%. It’s currently trading at multi-year lows, underperforming 97% of stocks in the broader market.

O'Reilly Holding Up Better 

Does that portend anything worrisome for O’Reilly?

The answer is a resounding no. Advance Auto Parts made its own mess, dropping prices to compete with O’Reilly and Autozone, but that made a big dent in profit margins and resulted in the company slashing its shareholder payout. MarketBeat’s Advance Auto Parts dividend data show that stark reduction, from $1.50 per share way down to $0.25 a share. 

Analysts see Advance Auto Parts’ earnings declining by 54% this year. 

O’Reilly, meanwhile, is expected to grow earnings by 12% to $37.37 per share. 

Trends Still In O'Reilly's Favor

What’s driving growth? While the era of used cars growing in price is behind us, as another pandemic anomaly fades into the rear-view mirror, inflation and rising interest rates are still keeping many would-be buyers out of new-car showrooms. 

That’s good for O’Reilly and its industry peers. 

But what about potential roadblocks such as electric vehicles, which present a whole new set of challenges, as their repairs may be unfamiliar to mechanics well-versed in traditional internal combustion engines?

In response to a question at last year’s analyst day, O’Reilly CEO Greg Johnson addressed that topic, saying EVs’ multiple electric motors and large battery packs result in significant heat generation. 

“So you have to have the cooling systems on EVs are going to be much more elaborate than what they are on internal combustion engine vehicles. So that category is good for us,” Johnson said.