{"id":289673,"date":"2010-02-07T13:15:47","date_gmt":"2010-02-07T17:15:47","guid":{"rendered":"http:\/\/smallcapworld.wordpress.com\/?p=1824"},"modified":"2010-02-07T13:15:47","modified_gmt":"2010-02-07T17:15:47","slug":"auto-parts-looking-up-oem-and-aftermarket","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/289673","title":{"rendered":"Auto Parts Looking Up: OEM and Aftermarket"},"content":{"rendered":"

We read that the auto industry is picking itself up\u00a0and looking at what may have been pent-up demand that is starting to\u00a0turn into an increase in car sales.\u00a0 Ford reported an unexpected — perhaps even\u00a0startling –increase in sales, and GM has a fleet of Chevy cars that are being advertised as offering better mileage than the comparable models of Toyota.\u00a0 Who knew? Ward’s Automotive reports auto sales stats for January 2010: http:\/\/wardsauto.com\/keydata\/USSalesSummary1001.xls<\/a>\u00a0– some up, some down, some up quite a lot.<\/p>\n

Those data precede the trashing of Toyota’s reputation due to a couple of biggie recalls that may have been handled with surprising naivete: http:\/\/www.nytimes.com\/2010\/02\/07\/weekinreview\/07segal.html?ref=business<\/a>.\u00a0<\/p>\n

If you are wondering what\u00a0a healthier auto industry\u00a0might mean for the small-cap investor, so are we.\u00a0 The auto industry is characterized by chains of vendors, each making small bits or subsystems that are delivered to the auto manufacturer, which acts in large part as a systems integrator from a manufacturing viewpoint.\u00a0 So as the economy begins to look up and people begin to make major purchases such as new cars, it makes sense that the “upstream” companies will bear looking at as well.\u00a0 Turns out, of course, that we are not the only ones to follow that logic.<\/p>\n

We do not recommend stocks; we simply write about companies we find interesting.\u00a0 Please do your own diligence.<\/em><\/p>\n

Some of the first names that might come to mind when thinking of auto parts are larger companies that are not in our field of interest, though they are clearly significant (Lear, TRW Automotive, Magna, Johnson Controls, et al).\u00a0 But if you believe the car-truck-and-bus industry is going to show improving results, you should also look at companies like New Albany OH-based Commercial Vehicle Group (Nasdaq: CVGI; http:\/\/www.cvgrp.com\/<\/a>),\u00a0\u00a0which makes everything from aluminum-and-steel car bodies to electrical and wiring systems to air suspension seats for trucks.\u00a0 Sales at CVGI fell off the edge of the table, as you would expect, after the stuff hit the fan in 2008, but it has been concentrating on cash flow, expense reduction and financial liquidity in a big way, so that even though revenues for the third quarter ended Sept 30, 2009 dropped to $110 million from a previous-year $192 million — and losses went up concurrently, the company says its operating income has improved quarter-to-quarter in 2009 and it has no borrowings currently under its bank revolver.\u00a0 Though CVGI is not providing guidance, it may be reasonable to assume annual revenue in the $440 million range ($323 million as of the 9 months), which may make the current market cap of\u00a0 $109 million worth looking at.\u00a0 The stock closed Friday at $5.00 vs a 52-week high of $8.o8, on average volume of just over 80,000 shares per day — not great volume, but perhaps adequate to sustain interest.\u00a0<\/p>\n

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CVGI body construction can look familiar<\/p>\n<\/div>\n

Or one might look at Northville MI-based Amerigon Inc* (Nasdaq: ARGN; http:\/\/www.amerigon.com\/<\/a>), best known for its thermoelectric devices for cars, most notably its Climate Control Seat, which allows instant heating or cooling of car\u00a0seats using negligible energy.\u00a0 According to ARGN, over 90 well-known car models now offer ARGN seats, many of them as standard features.\u00a0 ARGN shares closed Friday at $7.99, off its year-high of $9.85, giving it a current market cap of about $172 million.\u00a0 Average trading is over 170,000 shares per day, and ARGN announced a date for its YE results:\u00a0 Feb 10.<\/p>\n

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Emissions Timeline, courtesy Tenneco Inc website<\/p>\n<\/div>\n

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A name that old-timers would associate with energy pipelines is Lake Forest IL-based Tenneco Inc (NYSE: TEN; http:\/\/www.tenneco.com\/<\/a>), but in fact this is a company that used to be called Tenneco Automotive, and it makes a dizzying array of emission control subsystems (including catalytic converters), suspension systems (shock absorbers included), and elastomer (rubber, more or less) products for customers all over the world.\u00a0 Revenues for 2009 were about $3.9 billion, down significantly year-to-year, but with a resurgence in the wind, losses down, debt down and its good customer Ford “on a roll.”\u00a0 TEN closed Friday at $18.34 vs a year-high of $21.32, for a market cap of about $870 million (about 22% of sales), and trading volume is, on average, about 1.5 million shares.<\/p>\n

Torrance CA is home to two interesting auto parts and subassembly suppliers.\u00a0 First, have a look at Motorcar Parts of America (Nasdaq: MPAA; http:\/\/www.motorcarparts.com\/<\/a>, which is a new-lamps-for-old company that recycles alternators and starters, buying up old ones, remanufacturing them, and selling them into the automotive parts aftermarket through retail distribution.\u00a0 MPAA shares closed Friday at $5.84, just off its year-high of $5.93, on volume of a bit over 30,000 shares per day, not great in a dollar-volume sense.\u00a0 Market cap is about $70 million, and a BB&T analyst is listed on Yahoo! Finance with a price target for the year of $8.00.<\/p>\n

Also in Torrance is Enova Systems* (NYSE Amex: ENA; http:\/\/www.enovasystems.com\/<\/a>) a specialist in hybrid and pure-electric drive trains for a variety of larger vehicles including school buses, stepvans (think of a UPS or FedEx delivery truck), and a variety of smaller haulers for big OEMs like Freightliner, Laidlaw\u00a0and First Auto Works (FAW\/one of the largest in China).\u00a0 ENA traces its heritage back to the old EV1, an electric vehicle program that was notoriously killed by GM in the way-back-when days, and it’s been around longer than most other companies in the electric and hybrid world.\u00a0 The first half of 2009 was a distinct bummer for ENA, but the third quarter started a strong recovery, and FAW seems likely to be the largest customer in 2010 dollarwise.\u00a0 ENA recently announced selection of its own Enova Ze as an electric\u00a0stepvan of choice for the United States GSA. \u00a0ENA closed Friday at $1.99 vs a year-high of $2.42, and daily average volume of 45,000 shares.\u00a0 Market cap is $42 million.<\/p>\n

Finally have a look at Colmar PA-based Dorman Products (Nasdaq: DORM; http:\/\/www.dormanproducts.com\/<\/a>), a maker of 92,000 replacement parts, including brake parts, power steering, window handles — you name it replacement parts for automotive aftermarket companies like the Manny-Moe-Jack guys, and big-box or warehouse retailers.\u00a0 As of Sept 30, 2009, sales were $280 million, actually UP from the previous year; gross profit was also up, and diluted earnings for the 9 months went from 2008’s $0.72 to 2009’s $1.04.\u00a0 Of course fix-it companies are said to do well in recessions, but this one looks like it has found the charm.\u00a0 DORM closed at $15.35 on Friday, vs a year-high of $17.25, with average volume of only about 29,000 shares, meaning the market may be small in terms of awareness.\u00a0 The market cap is just below the 9-month sales figure, at about $270 million.\u00a0<\/p>\n

*client of Allen & Caron, publisher of this blog.<\/p>\n

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We read that the auto industry is picking itself up\u00a0and looking at what may have been pent-up demand that is starting to\u00a0turn into an increase in car sales.\u00a0 Ford reported an unexpected — perhaps even\u00a0startling –increase in sales, and GM has a fleet of Chevy cars that are being advertised as offering better mileage than […]<\/p>\n","protected":false},"author":5339,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,7],"tags":[],"class_list":["post-289673","post","type-post","status-publish","format-standard","hentry","category-automotive","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/289673","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/5339"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=289673"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/289673\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=289673"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=289673"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=289673"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}