There are some industries that are a big part of the Australian economy and the average investor has a lot of exposure to those sectors. Finance and resources are well represented in all of the ASX index investments, as well as retail portfolios.
The automotive industry is also a big part of the Australian economy but not many investors have exposure to it.
I think the best way to grab a piece of this pie is through owning Bapcor Ltd (ASX: BAP) shares. Here are a few reasons why I like Bapcor as an investment:
Defensive business
Bapcor is the largest auto parts business in Australia and New Zealand.
You might think that an auto parts business isn't defensive because it relates to cars and that could count as discretionary spending.
However, I'd argue that cars are a necessity for most people and if their car breaks down then they're going to buy the part to keep their car running. In-fact, people are more likely to use Bapcor's services in a downturn because they will try to keep their car running longer instead of trading it in for a new car.
Diverse business
There are many areas to Bapcor's business. Burson is the main earner, which provides a quick service to mechanics.
Bapcor also has Autobarn which is a retailer of automotive accessories. It has car servicing businesses Midas and ABS. It owns a large number of industry category specialists that are number one or two in each segment. Bapcor has a diverse business.
Growing margins
Bapcor has done a very good job of reducing costs and growing margins with all the businesses that it has acquired in recent years.
In FY17 it grew its 'continuing operations' gross margin from 44.2% to 45.7% and the earnings before interest, tax, depreciation and amortisation (EBITDA) margin from 11.2% to 11.6%. This led to the pro-forma earnings per share growing by 36.4%.
Foolish takeaway
Bapcor is trading at a very reasonable price of 23x FY17's earnings with a grossed-up dividend yield of 3.34%. This is particularly compelling as Bapcor just had its annual general meeting and management confirmed that net profit after tax (NPAT) growth is expected to be around 30%. I reckon Bapcor is a buy at the current price.
