The US auto industry is currently in the spotlight amid a massive United Auto Workers’ strike against three major companies, Ford, General Motors and Stellantis. Analysts are now certain that these strikes will have direct effects on financial results of these companies in the coming months. Wall Street Journal recently reported that Wells Fargo analysts believe that the three companies’ proposals to increase auto workers’ salaries would “add an estimated $700 million to $1.2 billion in costs to each company over the four-year life of the contract.” Estimates suggest that these costs will reach $1.7 billion to $2.4 billion under the union’s demand of 30% increase in wages, plus cost-of-living adjustments.
However, the WSJ report quoted Richard Hilgert, a senior equity analyst for the automotive sector at Morningstar’s research arm, who said that despite the strikes the auto companies are still in a position to escape massive losses given these strikes don’t prolong.
Analysts are also hinting that these strikes could expand to other parts of the industry, including the electric vehicle companies. Many auto components and parts companies that are directly or indirectly linked with traditional car companies and EV companies are anxiously waiting for these strikes to end. And they also have other plans in case the strikes do not end soon. The Wall Street Journal report quoted Ricardo Rodriguez, chief financial officer at Aspen Aerogels. Aspen Aerogels makes battery safety products for electric cars. Rodriguez said that if strikes in the auto industry expand to the EV sector or do not end soon, his company is ready to shift its focus to energy industrial products. The executive said his company could make the shift “within an hour.” Other companies are not that fortunate, though. Companies that supply parts and technologies to major car companies like Ford and General Motors are heavily reliant on the normal business cycle and these current disruptions could take a toll on their business. For example, according to the WSJ report, Sensata Technologies, which makes sensors for cars, could see huge impact from the current strikes as Ford, GM and Stellantis account for a major chunk of the company’s revenue. The report, citing the company’s Vice President of Finance Jacob Sayer, said that about 9% of Sensata’s global revenue could be impacted if all plants for the three carmakers are offline.
For this article we first used a stock screener to list down all publicly traded companies that make and sell auto parts and components. We then gauged hedge fund sentiment for these stocks using Insider Monkey’s database of 910 hedge funds and picked 13 stocks with the highest number of hedge fund investors. These are the best auto parts and components stocks to buy according to hedge fund investors.
Best Auto Components and Parts Stocks to Buy Now
A mechanic working on a car in an auto shop, skillfully replacing the aftermarket parts. Editorial photo for a financial news article. 8k. --ar 16:9
Ohio-based Dana Incorporated (NYSE:DAN) is a supplier of axles, driveshafts, transmissions, and electrodynamic, thermal systems and parts. In July Dana Incorporated (NYSE:DAN) posted Q2 results. Adjusted EPS in the quarter came in at $0.37 beating estimates by $0.19. Revenue in the quarter jumped 6.2% year over year to $2.75 billion, meeting estimates.
As of the end of the second quarter of 2023, 27 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Dana Incorporated (NYSE:DAN). The biggest hedge fund stakeholder of Dana Incorporated (NYSE:DAN) during this period was Richard S. Pzena’s Pzena Investment Management which owns an $84 million stake in the company.
Auto parts and repair company LKQ Corporation (NASDAQ:LKQ) shares have gained about 3% over the past one year. As of the end of the second quarter of 2023, 32 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in LKQ Corporation (NASDAQ:LKQ). The biggest stakeholder of LKQ Corporation (NASDAQ:LKQ) during this period was Noam Gottesman’s GLG Partners which owns an $111 million stake in the company. LKQ Corporation (NASDAQ:LKQ) is also a dividend-paying stock, with a yield of over 2%.
In July LKQ Corporation (NASDAQ:LKQ) posted second quarter results. EPS in the quarter came in at $1.09 surpassing estimates by $0.01. Revenue in the quarter increased by 3.3% year over year to $3.45 billion, meeting estimates. However, LKQ Corporation (NASDAQ:LKQ) narrowed its organic revenue growth estimates for the full year.
Michigan-based automotive electronics supplier Visteon Corp. (NASDAQ:VC) ranks 11th in our list of the best auto component stocks to buy now. Visteon Corporation (NASDAQ:VC) has gained about 20% over the past one year. In August Visteon Corporation (NASDAQ:VC) posted second quarter results which came in weaker than expectations. Adjusted EPS of Visteon Corporation (NASDAQ:VC) in the quarter totaled $1.18 missing estimates by $0.42. Revenue in the period jumped 15.9% year over year to $983 million, missing estimates by $1.45 million. Visteon Corporation (NASDAQ:VC) also reaffirmed its full year 2023 guidance.
Insider Monkey’s database of 910 hedge funds shows that 32 hedge funds had stakes in Visteon Corporation (NASDAQ:VC). The most significant stakeholder of Visteon Corporation (NASDAQ:VC) during this period was Richard Driehaus’s Driehaus Capital which had a $50 million stake in the company.
Here is what Third Avenue Management specifically said about Visteon Corporation (NASDAQ:VC) in its Q3 2022 investor letter:
“Specialty finance company, Encore Capital Group (ECPG), was added to the Fund in the third quarter and the thesis will be described in detail later on. Auto supplier, Visteon Corporation (NASDAQ:VC) was eliminated from the portfolio this past quarter. It was a profitable investment for shareholders, yet did not live up to our expectations. The challenges of competing in the auto supplier industry often diluted Visteon’s robust product development successes. Given the volatility and elevated valuation, Fund Management decided to monetize the position and redeploy the proceeds into companies with more favorable risk/return attributes such as ECPG.”
BorgWarner Inc. (NYSE:BWA) sells systems and technologies related to internal combustion, hybrid and electric vehicle products and off-highway applications. In August Goldman added several new stocks in its Alpha Surprise portfolio. This portfolio "screens for inexpensive, out-of-consensus stock ideas using our fundamental analysts’ earnings estimates." BorgWarner Inc. (NYSE:BWA) was added to the portfolio by the investment firm.
Out of the 910 hedge funds tracked by Insider Monkey, 33 hedge funds in Insider Monkey’s database of hedge funds reported owning stakes in BorgWarner Inc. (NYSE:BWA). The biggest hedge fund stakeholder of BorgWarner Inc. (NYSE:BWA) during this period was Natixis Global Asset Management’s Harris Associates which owns a $496 million stake in the company.
Ariel Focus Fund made the following comment about BorgWarner Inc. (NYSE:BWA) in its Q1 2023 investor letter:
“Several stocks in the portfolio had strong returns in the quarter. Leading supplier of solutions for combustion, hybrid and electric vehicles BorgWarner Inc. (NYSE:BWA) increased following a top- and bottom-line earnings beat, as well as a solid financial guidance for 2023, despite foreign currency headwinds. Meanwhile, BWA continues to successfully execute on its Charging Forward initiative and remains on track to deliver $4 billion in electric vehicle sales by 2025. In our view, BWA’s electric motor and driveline technology offerings position the company to grow intrinsic value throughout the evolution in the hybrid and electric vehicles market.”
Indiana-based duty automatic transmissions and hybrid propulsion systems company Allison Transmission Holdings Inc. (NYSE:ALSN) ranks 9th in our list of the best auto components and parts stocks to buy now according to hedge funds.
In July Allison Transmission Holdings Inc. (NYSE:ALSN) posted second quarter results. EPS in the quarter came in at $1.92 beating estimates by $0.29. Revenue in the quarter jumped 17.9% year over year to $783 million, surpassing estimates by $47.03 million.
Out of the 910 hedge funds tracked by Insider Monkey, 33 hedge funds reported owning stakes in Allison Transmission Holdings Inc. (NYSE:ALSN). The most significant stakeholder of Allison Transmission Holdings Inc. (NYSE:ALSN) during this period was Cliff Asness’s AQR Capital Management which owns a $188 million stake in the company.
Ohio-based tire company The Goodyear Tire & Rubber Company (NASDAQ:GT) is one of the best auto components and parts stocks to buy now. As of the end of the second quarter of 2023, 33 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in The Goodyear Tire & Rubber Company (NASDAQ:GT). The most significant stakeholder of The Goodyear Tire & Rubber Company (NASDAQ:GT) during this period was Ken Griffin’s Citadel Investment Group which owns a $31 million stake in the company.
In June this year The Goodyear Tire & Rubber Company (NASDAQ:GT) stock jumped after speculations around activist investor activity. Elliott Investment Management revealed a stake in The Goodyear Tire & Rubber Company (NASDAQ:GT) with plans to get five board seats.
The Goodyear Tire & Rubber Company (NASDAQ:GT)’s CEO Richard Kramer in the latest earnings call talked about the company’s negotiations with Elliot and said:
“I’ll take one step back and just say that the discussions that we’ve had with the Elliott team that we’ve been speaking with have been, I would suggest very constructive and collaborative. And I think when they look at us they see an opportunity for improved margins – margin expansion, if you will, and a better balance sheet on reducing leverage. And I would tell you we agree for obvious reasons. So that’s where we stand. So as we, as we think about that special committee was in addition to adding some new very qualified directors, we put our special committee together to start looking at these things. And as you said, that’ll be both operational and it will be strategic. And maybe I’ll just talk a little bit about the strategic side for a moment and then Christina you can jump in on some of the things we’re thinking on from an operational side as we move ahead.
Genuine Parts Company (NYSE:GPC) shares have lost about 15% year to date through September 27. In the second quarter Genuine Parts Company (NYSE:GPC)’s adjusted EPS came in at $2.44 beating estimates by $0.09. Revenue in the quarter jumped 5.6% year over year to $5.9 billion, missing estimates by $60 million.
Garrett Motion Inc. (NYSE:GTX) sells turbocharger and electric-boosting technologies for light and commercial vehicle original equipment manufacturers worldwide. Insider Monkey’s database of 910 hedge funds shows that 35 hedge funds were long Garrett Motion Inc. (NYSE:GTX) as of the end of the second quarter. Howard Marks’s Oaktree Capital Management owns a $334 million stake in Garrett Motion Inc. (NYSE:GTX).
In July Garrett Motion Inc. (NYSE:GTX) posted second quarter results. GAAP EPS in the period came in at -$1.88. Revenue in the quarter jumped about 17.6% year over year to $1.01 billion. Garrett Motion Inc. (NYSE:GTX) also upped its full-year 2023 revenue guidance to $3.84 billion to $4.03 billion from its prior guidance of $3.79 billion to $3.98 billion.
Alluvial Capital Management made the following comment about Garrett Motion Inc. (NASDAQ:GTX) in its Q4 2022 investor letter:
“On the topic of superchargers, our investment in Garrett Motion Inc. (NASDAQ:GTX) preferred shares is performing well. Garrett Motion shares have been rising as the semiconductor supply chain normalizes, unsnarling automotive production. Additionally, rumors of a possible sale began swirling in November. The company has not commented on the rumors, but an eventual sale has always been the most likely outcome for Garrett Motion. Should a sale come to pass, I think holders of Garrett’s convertible preferreds can expect at least $12.”
