BorgWarner's Long-Term Appeal Remains Intact Despite Growing Near-Term Concerns

Between internal combustion engines, hybrids, and all-electric vehicles, BorgWarner (NYSE:BWA) has an attractive and comprehensive portfolio of solutions, and I expect BorgWarner to remain one of the key suppliers to the industry through this extended transition period. There are certainly short-term risks from COVID-19 and longer-term risks tied to uncertainties in how much OEMs will in-source (and the margins they will be willing to allow to suppliers), but I remain of the opinion that BorgWarner will maintain strong content growth, allowing the company to outgrow underlying production volumes across the next decade.

When I last wrote about BorgWarner, I had some concerns that the rally might have gone a little too far too fast, and the shares have since pulled back about 15%. I've taken advantage of this pullback to add shares in my own account, and I believe the shares are once again priced to offer an attractive double-digit long-term total annualized return. I don't ignore or dismiss the above-average risks here, but I believe the current price undervalues the quality of the company and its ability to leverage not only hybrid/EV content growth, but also growth from more conventional powertrains that will still be in production for some time.

 

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BorgWarner's Long-Term Appeal Remains Intact Despite Growing Near-Term Concerns