Cars: Yes — But Wait, There’s More!

Now the auto suppliers have started to throw their hats into the bailout ring, but don’t paint every company in this niche as a beggar with the same stroke. Tim Aeppel of The Wall Street Journal describes how fierce competition and strict requirements from the Big 3 forced many companies to seek opportunities beyond the auto market. http://online.wsj.com/article/SB123327563723431309.html?mod=googlenews_wsj

Here are a few midwestern companies whose no-nonsense approach and diversified markets may give them an upside that can outperform the better-known automotive supplier, whose eggs tend all to be in one big basket.

Northville, MI-based Amerigon (Nasdaq:ARGN, http://www.amerigon.com) has developed a seat warming/cooling technology that is a feature in over 20 well-established vehicle lines. But don’t think of them as just an auto supplier. They are working to include a variant of their technology into Sealy’s (NYSE:ZZ, http://www.sealy.com/) bedding products. They are a leader in the field of thermoelectrics, which uses advanced circuitry to create temperature change via an electric current.  Intel (Nasdaq:INTC) recently announced a breakthrough by embedding a thermoelectric device on a computer chip, which is likely to have huge efficiency and cost benefits for the future of electronics  http://www.spectrum.ieee.org/jan09/7572.  Amerigon is leading a team of top scientists to use thermoelectric principles to transfer exhaust into electricity.  ARGN closed 2/06 at $4.26, down from a 52-week high of $20.37, with average trading volume of over 200,000 shares.

The $209 billion aerospace industry, which is anticipating growth of 8-10 percent over the next 10 years, is a potential life preserver for those who had the foresight to diversify. http://www.crainsdetroit.com/article/20090205/FREE/902059971/-1The medical device market is another opportunity – a ball bearing is a ball bearing whether it goes into a car or artificial hip. Though not that simple, Elkhart, IN-based CTS Corporation (NYSE:CTS, http://www.ctscorp.com/) is a diversified manufacturer that will make the transition to these growing markets easier than its peers. It trades at $5.16 which is near its year low, and down from $13.99 as a 52-week high – but you might compare future cash flow to diversified manufacturers, not just to auto supply.

Chicago-based LKQ Corporation (Nasdaq:LKQX, http://www.lkqcorp.com/home/home.asp) salvages OEM products for the aftermarket repair market so it combines the green and frugal spirit of the day. Not a bad place to be as consumers hold off on big purchases and hold on to their vehicles for longer.

Racine, WI-based Modine Manufacturing (NYSE:MOD, http://www.modine.com/) designs thermal management components, and although they serve the auto parts sector, only a third of revenues come from its automotive division, with the rest divided among the heavy equipment, heating/ventilation/air-conditioning (HVAC), electronics and fuel-cell markets. Its diversification strategy began in the mid 90’s.  MOD closed 2.06 at $2.03, down from a year-high of $19.60, on volume of more than 360,000 shares.

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