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BorgWarner Making Green By Being Green


In a green world, BorgWarner is a clear winner as it focuses on environmentally-friendly products.

"They call it Stormy Monday, but Tuesday's just as bad
They call it Stormy Monday, but Tuesday's just as bad
Lord, and Wednesday's worse and Thursday's all so bad"

- Stormy Monday (T-Bone Walker, as performed by the Allman Brothers)

This goes out to all of the great people at The 'Ville. For those searching for the true meaning of "community" in every sense of the word you need look no further than the great people that have made Toddo's vision a reality at Minyanville. On one of my first visits to its offices on the east side of Manhattan, Charlie Mangano handed me the classic Allman Brothers' CD, Live At The Fillmore East. Recorded over a two day period in March of 1971, this may be the quintessential album for capturing the Allman Brothers in their rawest and purest form. Everybody on the planet should own this album!

After the body blow that General Motors (GM) landed this morning I thought the lyrics of Stormy Monday truly captured the feel of market participants. But as bad as the headlines appear to be for General Motors and the overall state of the auto industry, not all the news is bad.

BorgWarner (BWA), according to its website, "is the recognized leader in advanced products ad technologies that satisfy customer needs in powertrain components and systems solutions."

Those are nice words but let's take a look at what really is going on. From Al Gore winning a Nobel Prize to Leonardo DiCaprio appearing on the cover of Vanity Fair standing next to a baby polar bear, the push for heightened concerns about the environment are everywhere. To that end, in the auto industry at least, BorgWarner is a clear winner as it is one of the leading suppliers focused on environmentally friendly products. BorgWarner specializes in parts that improve vehicle efficiency.

To that end, Jairam Nathan of Banc of America Securities recently wrote, "BorgWarner will be able to maintain its low double-digit backlog growth as [it] benefit[s] from growing penetration of turbochargers, automatic and dual clutch transmissions and tire pressure monitoring systems."

On November 5, BorgWarner said it expects $1.95 bln in net new powertrain business in 2008-2010. That would be a 15% increase over its previous three-year new business. And for those worried that a slowing U.S. economy will throw a monkey wrench into the BWA story, let's take a look at its revenue mix. BorgWarner receives 37% of its revenue from the Americas, 19% from Asia and 44% from Europe.

Having started the year out trading around $59, BWA is not exactly a diamond in the rough. And at 23.50 times trailing and 18 times forward earnings, one can argue that BWA is getting a bit rich on a valuation basis. But I think as the green movement continues to gain in strength coupled with the expected growth in Asia, the best is yet to come for BorgWarner.
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No positions in stocks mentioned.

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