Back in February, I thought BorgWarner (NYSE:BWA) shares were stuck in the difficult-to-invest space between good long-term potential and tougher short-term results (not to mention weak sentiment). Since then the shares are up about 10%, which is on the lower end of the auto parts/components companies I follow more closely (Continental's (OTCPK:CTTAY) ADRs have done worse, barely up at all, while Lear (NYSE:LEA) has done better than BorgWarner, and Valeo (OTCPK:VLEEY), Dana (NYSE:DAN), and Tenneco (NYSE:TEN) have done quite a lot better).
The central long-term debate around BorgWarner remains whether or not the company can maintain a significant presence in passenger vehicles, as major manufacturers like Volkswagen (OTCPK:VLKAY), Daimler (OTCPK:DDAIY), and Toyota (NYSE:TM) increasingly turn toward partial or full electrification for passenger vehicles. BorgWarner management still has a credibility gap brought on by lowered guidance and the company's goals for vehicle content/share post-2020 could well prove ambitious. That said, I continue to believe that the company's powertrain business and Remy assets are underappreciated and that there is upside even amidst a peaking/plateauing North American car market.
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Wall Street's Skepticism About BorgWarner's Future May Still Mean Opportunity