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On Wednesday, 25% tariffs were announced on autos and auto parts (White House Fact Sheet). As the President was speaking, my first reaction was:

Should have said dealer lots instead of inventory—be that as it may—but automakers had been preparing for such an outcome. The price action on Thursday validated my reaction as headlines such as the following hit the wires.

Thus, if I figured it out as the President spoke, many others did too. Hence, talking about a used car or auto parts retailer would not be what you expect from me. How about a domestic asset-light designer of aftermarket auto parts that has them contract manufactured and sells them under their own brands through various channels, including major auto parts retailers?

Dorman Products (DORM)

DORM is a leading Pennsylvania-based supplier of replacement and upgrade parts in the motor vehicle aftermarket industry. It addresses the light-duty, heavy-duty, and specialty vehicle sectors. Its major brands are:

• Dayton Parts

• Dorman

• Superatv

DORM marketed approximately 138,000 distinct parts in 2024 and provides bumper-to-bumper coverage with its parts. 81% of its products are sold under its brands, and the rest are sold under customers’ private labels or in bulk.

28% of DORM’s products are sourced from suppliers in the US. In 2024, 45% came from China, and the rest from other countries (specifics unavailable).

Where DORM stands out is its expertise in design, especially in aftermarket electronics parts. Currently, a regular vehicle has about 100 electronic parts, and high-end vehicles have much more than that.

DORM’s largest business segment is the light-duty and passenger vehicles aged between 7 to 14 years old. (77.9% of Net Sales).

Boring you? All right, let’s talk about tariffs.

Tariff Impact

Can someone please pass this along to the White House?

When asked about the specifics on the recent earnings call about the timelines and how it might impact pricing and working capital needs, this is what the CFO had to say.

So, there you have it: the exact timing of the impact on DORM. Before we move along, I would like to give a shout-out to the CEO and CFO of DORM. These guys know their stuff, are grounded in reality, don’t beat around the bush, and don’t sugarcoat it. Ask a question, and you get a straight answer. You should read the recent earnings call transcript; it will take less than five minutes, and you will see what I mean.

Since David brought up inventory turns, that sets us up nicely to look at their efficiency metrics.

Efficiency Metrics

Lines up with what David said. About two inventory turns a year. Also, while inventory turns deteriorated from 2020 to 2022, it has held steady since.

The deterioration in the receivables turnover in 2024 is a little concerning, and that could be due to the concentration of receivables from its top four customers.

Also, during 2024, two customers each accounted for more than 10% of net sales. In aggregate, these two customers—in the light-duty segment—accounted for 39% of net sales. If I were to guess, they must be big auto parts retailers.

Capital Efficiency Metrics

Pretty self-explanatory. Things improved drastically in 2024 due to:

• Debt repayments

• Lower interest rates

• Stellar performance of its largest business segment: Light Duty.

• Light Duty segment performance was driven by strong consumer demand and new products.

Income Statement Highlights

• The sequential growth rate in revenue is a concern. However, it is more in line with DORM’s long-run expected growth rate. That said, with tariffs in place, the revenue growth rate is expected to pick up over the next three to four years.

• The increase in SG&A was driven by an increase in variable costs, channel expansion, and new product development initiatives, specifically in the “Speciality Vehicles Segment”.

• R&D costs remain under control. This shows DORM’s expertise and ability to continue to innovate and design new products within the confines of their R&D budget.

• “Heavy Duty” segment continues to be a drag. The freight market continues to remain under pressure. Now, who warned in December that the freight market would remain under pressure in 2025 when the biggest voices in freight were calling for a rebound? Yes, the guy behind the keyboard sitting in his basement. (Refer to the December 14 article on JBHT and the freight market.)

• The margin expansion was stellar; so was EPS growth. No wonder the stock has performed well.

Outlook

The basic thesis here is that people are driving their cars longer, and that will only increase with the tariffs. This implies that they would need aftermarket parts for repairs, and more people will be spending more on those. This backdrop sets up well for DORM for the next three to four years.

DORM is trading at 125. The average analyst price target for DORM is 144. I assigned DORM an intrinsic value of 175. Also, I would request you to ponder upon the following chart. I might have had a little fun with my crayons, but it is worth a look.

APP and AVGO

I first wrote about AppLovin (APP) on January 13 for my Premium Subscribers. After that article, APP got hit by two short sellers. I wrote about APP again on March 1. On Thursday, APP got hit by a Muddy Waters short report. The stock ended the day down 20%.

I have written negatively about TSCO and AGCO recently; let’s see if short sellers target them next. This is becoming too much of a coincidence; SMCI, CVNA, and now APP. I find the coincidence intriguing.

Coming to AVGO (Broadcom). I was on a roll last year between May and November, going after all the AI bubble stonks. SMCI, NVDA, VRT, and AVGO. AVGO was more interesting as it had just completed its acquisition of VMware. I always take a look at big acquisitions, as there is room for accounting shenanigans. Guess what? I found some. So, I highlighted them on July 12.

AVGO has gone through quite a rollercoaster since then and is now below the price I warned. I annotated the chart below with key events and comments. All I can say is: Hock Tan, AVGO’s CEO, “Hock Taned” his investors. If my European friends didn’t get the joke, don’t worry; it is an American thing. You know there is this girl; OK!!! I will leave it at that.

Big Tech Has Spent Billions Acquiring AI Smart Home Startups

The pattern is clear: when innovative companies successfully integrate AI into everyday products, tech giants pay billions to acquire them.

Google paid $3.2B for Nest.
Amazon spent $1.2B on Ring.
Generac spent $770M on EcoBee.

Now, a new AI-powered smart home company is following their exact path to acquisition—but is still available to everyday investors at just $1.90 per share.

With proprietary technology that connects window coverings to all major AI ecosystems, this startup has achieved what big tech wants most: seamless AI integration into daily home life.

Over 10 patents, 200% year-over-year growth, and a forecast to 5x revenue this year — this company is moving fast to seize the smart home opportunity.

The acquisition pattern is predictable. The opportunity to get in before it happens is not.

INVEST BEFORE BIG TECH MAKES THEIR MOVE

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