Notwithstanding Toyota’s $2.2 billion second quarter profit and General Motors upcoming IPO, insiders say the global automotive industry is not back yet. It’s still sputtering along, leaking oil and pitching forward in fits and starts.
“The industry at large, worldwide…is still not in a healthy mode. In North America, as an example, we are hoping to get somewhere between 11.5 million units and 12 million units sold. And that is really considered to be a deep recession in the automotive industry and that is a similar story worldwide,” said Dan Coker, President and CEO of Northville, MI-based Amerigon * (Nasdaq: ARGN, http://www.amerigon.com), during his results conference call Aug. 4. That doesn’t necessarily mean, however, that smallcap stocks on the periphery of the industry like Amerigon are all suffering.
Amerigon, the developer of a proprietary solid-state thermoelectric technology and maker of actively heated and cooled vehicle seat systems, just reported its fourth straight quarter of record revenues and Coker suggested even better days may be ahead in the second half of 2010. Let’s take a look at some others related to the automotive industry.
Rochester, NY-based Monro Muffler Brake Co. (Nasdaq: MNRO, http://www.monro.com) is a very well-known car repair brand and it, too, has been enjoying a steady, if bumpy, upswing. MNRO, with a market cap of $828 million, was trading under $33 last February but recently climbed as high as $42. And, like Amerigon, it announced a record quarter on July 23 and upped its guidance for the rest of the year. Looks like one to watch.
China-based SORL Auto Parts (Nasdaq: SORL, http://www.sorl.cn) makes and distributes air brake valves, air controlling systems and other related parts for commercial vehicles and has a market cap of $176 million. The stock traded as low as $4.04 in 2009 in the depths of the recession, ran up as high as $12 in January but has remained flat for the past six months at around $9. Maybe worth checking into the second quarter results conference call at 8 a.m. Eastern Aug. 12.
Naperville, IL-based Chicago Rivet & Machine Co. (Amex: CVR, http://www.chicagorivet.com) is a small company ($15 million market cap) and makes assembly equipment, parts and tools for the automobile industry. The stock has been on a nice uptick since trading at around $14 in early July and now trades at around $16. No announcement yet on second quarter earnings.
Detroit-based American Axle & Manufacturing Holdings Inc. (NYSE: AXL, http://www.aam.com) designs and manufactures driveline and drivetrain systems and related components and was hit hard in 2009, dropping down to $2.62. But it has come roaring back and trades consistently in the $10 range with plenty of volume (daily trading volume tops 3 million).
We think it’s clear many auto-related stocks on the periphery of the automotive industry are worth watching. Don’t just take our word for it. A “smoother ride” for these kinds of stocks was recently highlighted by the Wall Street Journal (http://online.wsj.com/article/SB10001424052748703545604575407191735872802.html?ru=yahoo&mod=yahoo_hs).
* Denotes Allen & Caron client.