Advance Auto Parts
Thesis
We recommend buying 7.375% Senior Unsecured Notes due 2033, which currently trade at 100.008 and yield 7.37%. With $975 million outstanding and Ba3 / BB ratings, the notes offer attractive spread compression potential as fundamentals stabilize. Our base-case target price of 105.634 by year-end 2026 implies a 6.25% yield and delivers a compelling 13.3% IRR and 1.13x MOIC.
Did it work?
The investment thesis was to buy the Senior Unsecured Notes due 2033, expecting a price increase to 105.634 by year-end 2026. However, the notes have experienced a significant decline of 40.4% in price since the pitch, which contradicts the long position and indicates that the anticipated stabilization of fundamentals has not occurred. Given the substantial negative return within a relatively short time frame, the thesis has failed.
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