The automobile industry is on display in Detroit, but there's more to look at than just the new cars.
This month the 25th annual North American International Auto Show (NAIAS) has taken over Detroit’s Cobo Center. Since last Monday, automakers and auto parts manufacturers have revealed new prototypes and exhibited updated models to the press and public. Even Vice President Joe Biden visited out the show last week, delivering a speech that praised auto stocks like Ford (F), and General Motors (GM), and Chrysler on their comeback following the bailout, and checking out the stands.
As one of the most esteemed auto shows in the world, the NAIAS provides a comprehensive look at the trends surfacing within the auto industry. Here’s a glance at three of the most exciting developments to come out of Detroit:
The light side
Aluminum, carbon fiber reinforced plastic, and other materials made quite the (lightweight) impact this year, appearing in more cars as lighter, fuel-saving alternatives to steel. Ford introduced an aluminum clad version of its popular F150 pickup truck that weighs 700 pounds less than the standard model. BMW opted for carbon fiber reinforced plastic -- produced in conjunction with SGL Group (OTC:SGLFF) -- for its electric i3 and hybrid i8 cars. And Honda shared that it uses magnesium for steering beams and aluminum for hoods, when possible, in its vehicles.
Smartphone integration and advanced in-car technology were also heavily featured in Detroit. Overseas auto stocks like Honda (HMC) included the latest infotainment system in their new Fit subcompact. The system allows users to download a navigation app onto their phones, which they can then access through the Fit’s LCD screen instead of purchasing an expensive navigation system.
Toyota’s (TM) luxury brand Lexus also made an infotainment upgrade by adding a touchpad to the center in its RC F coupe. Detroit’s own GM also showed off some exciting new tech: its Cadillac ATS Coupe now boasts 4G LTE connectivity, and the automaker’s Chevrolet division is in the process of adding the service to its models.
Click on the interactive chart below to see data over time.
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On Monday, Nissan (OTC:NSANY) reached a major milestone when it hit 100,000 units sold of its all-electric Leaf car in the UK. Meanwhile, in Detroit, Audi stated that it was taking another stab at the electric car market with a revival of its previously axed R8 E-Tron supercar. The car, which is reportedly close to production, is rumored to be back in action due to advancements in lithium-ion battery capabilities.
Audi also previewed its all-road shooting brake car, a plug-in hybrid that pairs a lithium-ion battery with a gasoline engine and two electric motors. Over at Tesla’s (TSLA) stand, the two biggest announcements had to do with the company’s 2013 Model S electric sedan: fourth quarter sales of the car beat expectations by 20% and approximately 29,000 adapters were recalled last Tuesday due to a potential fire hazard.
NAIAS comes to an end on Sunday, so in the wake of these new products and advancements, we decided to look for investment opportunities among stocks involved with the auto industry. To begin, we constructed a universe of stocks comprised of the following industries: aluminum, auto parts, communication equipment, and diversified electronics.
We included aluminum because of its role in automotive construction, communication equipment for supplying technology used in entertainment/infotainment systems, and diversified electronics for building lithium-ion batteries for electric cars.
Since our list is modeled off of the trends at the auto show, we first screened for stocks with 5-year projected earnings-per-share growth above 15%. This means that investors see strong long-term growth potential in these stocks. We further narrowed down our list by looking for rallying stocks, specifically stocks are trading above their 20-day, 50-day, and 200-day moving averages (MA). This indicates that the stocks have strong upward momentum.
We were left with three stocks on our list.
Click on the interactive chart below to see sales data over time.
Do you think these stocks have significant upside potential given the features showcased at this year's auto show? Use this list as a starting point for your own analysis.
1. Alcoa, Inc. (AA, Earnings, Analysts, Financials): Engages in the production and management of aluminum, fabricated aluminum, and alumina.
Market cap at $13.08B, most recent closing price at $12.13.
The stock is currently rallying 15.26% above its 20-day MA, 24.10% above its 50-day MA, and 41.30% above its 200-day MA.
EPS next 5 years: 32.42%
Last week, Alcoa announced the completion of a $300 million expansion of its Davenport, IA facility that is geared towards augmenting the company's ability to supply aluminum sheet products to automakers. Noting the growing demand for aluminum within the auto industry, Chairman and CEO Klaus Kleinfeld stated that the Iowa project was the first of three planned facility expansions specifically designed to meet the automotive community's needs.
The other expansions are taking place at a joint venture rolling mill in Saudi Arabia (expected completion: end of the year) and in Alcoa, TN (expected completion: mid-2015).
2. Johnson Controls Inc. (JCI, Earnings, Analysts, Financials): Engages in building efficiency, automotive experience, and power solutions businesses worldwide.
Market cap at $35.25B, most recent closing price at $51.55.
The stock is currently rallying 1.03% above its 20-day MA, 2.85% above its 50-day MA, and 23.96% above its 200-day MA.
EPS next 5 years: 15.73%.
In September, Johnson Controls previewed its Micro Hybrid battery system -- designed to help mild hybrids save fuel -- at the International Auto Show in Frankfurt. Mild hybrids, or micro hybrids, are cars that have electric motors but are not solely powered by the motors.
Examples include the BMW 320d, Smart Four Two, and Volkswagen’s Passat BlueMotion. Johnson Controls' lightweight system pairs a 48-volt lithium ion battery with a 12-volt starter battery, and, according to the company, can increase fuel economy up to 15%. The company began testing its system with select customers last month.
3. QUALCOMM Incorporated (QCOM, Earnings, Analysts, Financials): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services.
Market cap at $128.83B, most recent closing price at $75.46.
The stock is currently rallying 2.86% above its 20-day MA, 4.41% above its 50-day MA, and 13.75% above its 200-day MA.
EPS next 5 years: 16.67%
Since 2010, Qualcomm has provided Audi with connectivity services for its cars, and now the company is expanding its automotive offerings with its new Snapdragon™ 602A applications processor. The chip powers infotainment systems, has 3G/4G LTE connectivity and WiFi, and is capable of supporting numerous features, including facial and gesture recognition and backseat 3D gaming. Snapdragon will be available for sampling later this quarter.
(List compiled by Mary-Lynn Cesar. Quarterly sales data sourced from Zack's Investment Research. All other data sourced from Finviz.)
Analyze These Ideas: Getting StartedRead descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)
Dig Deeper: Access Company Snapshots, Charts, FilingsAlcoa, Inc. (AA, Chart, Download SEC Filings) Johnson Controls Inc. (JCI, Chart, Download SEC Filings) QUALCOMM Incorporated (QCOM, Chart, Download SEC Filings)
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