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A Turnaround Story?

Considered by some as a gauge of consumer health, most automotive parts retailers have held up well in recent months, but Pep Boys-Manny, Moe & Jack stumbled after earnings disappointed and yet investors are buying in.

The Philadelphia-based company has a 9% operating margin, which is roughly half that of its chief competitor AutoZone . Asked by host Melissa Lee whether the retailer is concerned about preserving that number, CEO Michael R. Odell says the company has a long way to go. But the company is a bit of a "turnaround" story, Odell points out, as it made more money last year than in the last 12 combined. The business added another 21% in operating earnings in the first quarter, he adds and expects to improve both the top and bottom line.

Looking forward, Odell says the company is concentrating on developing additional tire services centers closer to where people live and work. Auto parts, he points out, is just 1/3 of their business.

What's the Trade?

Because PBY can raise margins by just one-percent, says Guy Adami of Drakon Capital, this becomes an "very interesting" stock that will squeeze a lot of shorts out. But the last quarter, he adds, was disappointing.

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Trader disclosure: On July 21, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (BAC), (FCX), (GOOG), (MOS), (SBUX); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Terranova owns (EMC), (CREE), (CRCM), (LRCX), (COP), (AXP), (BMO), (CSX), (PEP), (CVS), (GS), (PCP), (C), (APA), (FCX), (JOYG), (MMM), (MOS), (GLD), (UAUA), (WYNN), (GOOG), (BBY), (SU), (KOL); Pete Najarian owns (C) calls; Pete Najarian owns (CRUS) calls; Pete Najarian owns (ISRG) call spreads; Pete Najarian owns (DD) call spreads; Pete Najarian owns (GNW) call spreads; Pete Najarian owns (V) call spreads; Pete Najarian owns (CNI) call spreads; Pete Najarian owns (TEVA) call spreads; Pete Najarian owns (PFE) call spreads; Kelly owns (BP) puts; Kelly is short (GS)

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