Auto Industry’s Strong Finish in 2011 Has Small Cap Automotive Stocks Upbeat for 2012

All the early indications are that the automobile industry, which has suffered notoriously for several years, is poised for a much better 2012. That’s partly because 2011 ended on such a positive note–winding up the best year for sales since the start of the recession three years ago, according to the New York Times (http://www.nytimes.com/2012/01/05/business/chrysler-sales-climbed-26-last-year.html?scp=2&sq=bill%20vlasic&st=cse).

Auto sales were up 10 percent in 2011 to 12.8 million vehicles sold, far short of the 16 million total sales before the recession but certainly much better than recent years. Individually, Chrysler was up 26 percent (driven in part by its “Imported from Detroit” advertising campaign), GM 13 percent, Ford 11 percent. Honda sales were down 18 percent during the year and Toyota sales were basically flat.

American cars owned 47 percent of the total sales market in 2011, up from 45 percent in 2010, according to the Times, and the U.S. “remained the most profitable car market in the world.” The Times story included a JD Powers report noting that “December was the first month in which sales to individual customers (excluding big fleet sales) topped 1 million since the August 2009 spike during the federal cash-for-clunkers trade-in program.”

Most analysts suggest that the big question for 2012, putting aside considerations of the overall strength of the economy, will be how well the U.S. automakers will do compared to their foreign counterparts, who were hindered by supply issues caused by such things as the tsunami in Japan and flooding in Thailand. Most of the Asian car makers, as well as Europeans such as Volkswagen, have geared up with new products that could pose a threat to their American rivals. Many analysts are predicting that the U.S. “Big Three” will lose market share in 2012, but should continue to prosper because of the restructuring efforts made during the recession.

All this should be particularly good news to the legions of small cap companies that feed into the global automobile market. These include many long established names in the auto industry including:

Quincy, IL-based Titan International (NYSE: TWI, http://www.titan-intl.com) manufactures wheels, tires and other products for vehicles in the agriculture, earthmoving and construction markets. TWI sells its products to automotive OEMs and in the aftermarket through its own dealers as well as distributors and independent dealers. Its stock, which is sitting about halfway between its 52-week range ($12.97-$31.42), has gnerally been trading up since Oct. 3 and closed Jan. 9 at $20.39.

Detroit-based American Axle and Manufacturing Holdings (NYSE: AXL, http://www.aam.com) designs and manufactures drivetrain and driveline systems for the automotive industry. AXL has been on the upswing since mid-November when it was trading for less than $8. It closed Jan. 9 at $11.34, down 6 cents on the day. Its 52-week range is $6.77-$16.20.

Colmar, PA-based Dorman Products (Nasdaq: DORM, http://www.dormanproducts.com) supplies auto replacement parts and service line products primarily for the automotive aftermarket. Its brand names include OE Solutions, HELP!, First Stop and Pik-A-Nut. DORM was characterized as “poised for solid growth” in 2012 by Investopedia (http://stocks.investopedia.com/stock-analysis/2011/Small-Caps-For-2012-STRL-TA-DORM-CPWM1207.aspx?partner=YahooSA#axzz1ibl7JQSS). Its 52-week range is $26.57-$43.04 and it closed Jan. 9 at $36.88, down 46 cents on the day.

Novi, MI-based Cooper-Standard Holdings (EBB: COSH.OB, http://www.cooperstandard.com) manufactures and sells fluid handling, body sealing and anti-vibration systems to automotive OEMs and replacement markets. Its products are used in SUVs, light trucks, passenger vehicles and sedans. The stock trades lightly, and is languishing down at the bottom of the 52-week range ($33.25-$52). COSH closed Jan. 9 at $35.50.

Troy, MI-based Meritor (NYSE: MTOR), http://www.meritor.com) designs, manufactures and sells a wide range of systems, parts and components to automotive OEMs and the aftermarket. The company changed its name from ArvinMeritor in March 2011. MTOR stock suffered through a steady decline throughout most of 2011 but managed to rally starting in late November. It’s currently trading near the bottom of the 52-week range ($4.80-$22.65) and closed Jan. 9 at $6.09, up 21 cents for the day.

New York City-based Fuel Systems Solutions (Nasdaq: FSYS, http://www.fuelsystemssolutions.com) designs and manufactures alternative fuel components and systems including fuel injectors and fuel pressure regulators. It’s 52-week range is $15.35-$30.80. It closed Jan. 9 at $17.47, up 12 cents for the day. If interested, the company will be presenting at the annual Needham Growth Conference in New York on Jan. 12.

Warren, OH-based Stoneridge (NYSE: SRI, http://www.stoneridge.com) designs and manufactures electrical components for the automotive, agricultural, medium and heavy-duty truck and off-highway vehicle markets. BB&T Capital Markets just initiative coverage of SRI in mid-December with a Buy rating. Its 52-week range is $4.53-$16.87. It closed Jan. 9 at $9.15, up 7 cents on the day.

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