Tuesday, November 9, 2010

Bookkeeping: Selling 1/5th of BorgWarner (BWA) on Positive Future Business Announcement

It is difficult to find points to sell stocks now because things that are overbought just stay that way, go sideways, and then make a new leg up, rather than experiencing any moderate corrections - where I'd normally buy back a portion of the stock I sell along the way.   Hence I am winging it, since I have little context for this type of market.  I am selling 1/5th of BorgWarner (BWA) simply to lock in profit on some good news today on future business. The press release is not affecting the stock much, due to the large run already achieved.

Speaking of the release it speaks to my comments that aside from cyclical recovery in the auto industry, certain companies have very strong secular growth stories as well.  That said, valuations are not cheap anymore.

Via Press Release:

  • BorgWarner Inc. today announced $2.3 billion of expected net new powertrain business for 2011 through 2013, a 28% increase over its previous three-year net new business. Demand for the company's environmentally friendly technologies, such as gasoline and diesel turbochargers, dual-clutch transmission technology, engine timing systems and emissions products, is expected to continue to drive strong growth. 
  • Of the total new business, 77% is anticipated from engine-related products such as turbochargers, ignition systems, emissions products, engine timing systems, variable cam timing modules and thermal systems. The other 23% is expected from drivetrain-related products including the company's fuel-efficient DualTronic® transmission technology and its traditional automatic transmission and all-wheel drive technologies.
  • The European market remains the leader in the adoption of new powertrain technology and Europe accounts for 45% of our expected new business
  • As our expansion in Asia continues, new business sales are expected to account for about 30% of the total in that region by the end of the period. 
  • "Tightening emissions standards and a sharpened focus on fuel economy in the commercial vehicle market is expected to provide additional growth for BorgWarner. The top twenty customers of our three-year net new business include three commercial vehicle original equipment manufacturers. Approximately 15% of the expected new business is related to the commercial vehicle market."

Example of secular growth, even in a staid industry such as auto production:
  • Advanced technology turbochargers account for about 32% of the company's net new business, led by turbochargers for gasoline direct injected (GDI) engines. Turbocharging GDI engines is a key strategy employed by automakers to address the issues of fuel efficiency and emissions reduction while maintaining vehicle performance. The market for gasoline engine turbochargers is expected to nearly triple over the next five years, from about 3.5 million units today to over 10 million by 2015.

Long BorgWarner in fund; no personal position


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