Auto retail stocks are surging this summer, here's the best one to buy now.

Auto retail stocks are surging this summer, here's the best one to buy now, according to CNBC.

CarMax, Autonation, AutoZone, and O'Reilly have increased at least 40 percent over the past 3 months. Rental car company Avis has raked in 130 percent gains over the same period. Morgan Stanley recently upgraded Avis to overweight with a price target implying 43 percent upside.

“I look at this upgrade on Avis … and I think a couple observations. The stock is up 235% off of the lows. And from a technical perspective, you’re coming right up into this downtrend resistance line,” Craig Johnson, chief market technician at Piper Sandler said on Thursday. “I’d rather be fading this upgrade than buying it at this point.”

On the other hand, and significantly more expensive, is O'Reilly. “On a positive note, take a look at O’Reilly. This is a chart at this point in time which is up about 65% off the lows. You got about another 5% to go to get to that kind of major overhead resistance level around $450. My perspective, I’d buy a breakout above that, and I’d buy O’Reilly before I’d be buying Avis,” said Johnson.

O’Reilly has gained 28 percent in the past three months, outpacing the S&P 500. Nancy Tengler, chief investment officer for Laffer Tengler Investments, concurs with the bullish call for O’Reilly. “This is a company that its merchandise margins are greater than 50%. They actually grew sales in the March quarter year over year by about 2% and the free cash flow yield is 5%. It’s fundamentally a much stronger story,” she said.

Tengler is staying away from Avis for now. “I think that Avis play is done, or even if you make some money from here, it’s going to be a riskier trade from this level. So we like O’Reilly, and I think it should be given a second look even after appreciating off the lows,” she said.

O'Reilly has emerged as the top summer travel stock pick.

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Economics, Finance and Investing