Wednesday, September 8, 2010

Bookkeeping: Buying Back Some Magna International (MGA) and BorgWarner (BWA)

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Another 90% type of day, at least in my portfolio - every stock up, except for the 2 auto suppliers.  I am assuming the space got an analyst downgrade today since they are acting as outliers.

These stocks have retreated nicely to some level of support after going ballistic so I am using the opportunity to get back the exposure I sold off last week plus some.

First, Magna International (MGA).  I sold half the position last Thursday for a quick 11.5% gain in the mid $83s.  I was one day early but good enough considering the binary outcome of the employment report was the next morning; the stock actually ran to $86 on Friday's gap up, before reversing and now has come down to the $78s.  At $78 it will have 'filled the gap' from the Wednesday morning gap up on Chinese PMI, but I am going to go ahead and put a 2% purchase in at the mid $78s, or a 6% discount from where I sold last week.   The stock acts pretty nicely technically so as I become more familiar with how the stock behaves (first time ever owning it) I am moderately increasing position size.  I'll make another purchase if the stock can fall to the $75s (50 day moving average)



Second, BorgWarner (BWA).  I sold 40% of the position last Friday in the $48.10s as the stock hit overbought on the relative strength index.  I am going to go a bit slower in this name as it could have more downside (has not fallen as much as Magna) and only go with a 1.3% addition today, which reverses Friday's sale plus some.  This will be at a $2 discount to Friday's sale or 4.2%.   I'd like to buy more if/when the stock falls to $44 area (50 day moving average)



Other than that every other stock is going up in the perfectly correlated market.  Until they all go down ... like yesterday.

EDIT 10:40 AM - yes it appears to be a downgrade, which is the only explanation for stocks not moving in 1:1 correlation with the S&P 500 as the algos choose.  Remember, with the huge labor shed in the auto base, we now have profitability at 11-12M annual US sale run rate, whereas just 5 years ago you need 15-16M, so I am in no way counting on any surge in auto sales here or in Europe for ownership of this group.  They will do fine in the "square root" aka "meh" economy now that the industry has 'right sized'.

Magna downgraded to Neutral from Overweight at JP Morgan
JP Morgan downgraded names in the Auto Parts space to reflect lower sales/production forecasts through 2012 and inventory issues in the U.S. and Europe. :thefly



ll.coBorgWarner downgraded to Neutral from Overweight at JP Morgan
JP Morgan downgraded names in the Auto Parts space to reflect lower sales/production forecasts through 2012 and inventory issues in the U.S. and Europe. :t


Long Magna International, BorgWarner in fund; no personal position


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