An Automotive 'Green Day' Play
Welcome to the third installment of Cramer’s Green Day picks – those stocks that could now make you money after the April 2 Supreme Court decision in Massachusetts v. EPA that effectively made it possible to invest in companies that help cut back on or control pollution and CO2.
He’s already recommended plays in power plants and solar power, and now Cramer’s got an auto supplier by the name of Borg Warner . He thinks this one could go higher now that it’s going to be more difficult and expensive for companies to pollute with impunity and immunity. Borg Warner is all about controlling emissions and enhancing fuel economy, Cramer says. The company makes turbochargers that improve power output while simultaneously helping to reduce fuel consumption. If that isn’t better than a cash donation to the Sierra Club, Cramer doesn’t know what is.
BWA has an exhaust gas recirculation system that limits the amount of nitrogen oxide released by engines. Best of all, the company’s secondary air systems reduce hydrocarbon emissions during cold engine starts, Cramer says. That’s three ways right there for an automaker to produce cars that pollute less and don’t need as much energy.
Before the Supreme Court created Green Day, Cramer would have been leery of a company like Borg Warner because of the not-so-hot sector it’s in. But BWA doesn’t have all that much exposure to the Big Three automakers. It has 46% of its business in Europe, 27% in Asia and 27% in North America. It’s $1.7 billion in total and the backlog for 2009 is already bigger than ’07 and ’08 even though the company probably isn’t done expanding. Forty percent of BWA’s backlog comes from its turbochargers, and they are one of just six suppliers and control a quarter of the market for them. Cramer thinks Borg Warner could benefit from Green Day now that there’s a much stronger incentive for automakers to use environmentally-friendly parts, and it can’t get too hurt from the U.S. auto industry because it’s got most of its footing in other areas of the world.
Bottom line: The Supreme Court set a precedent in its Green Day decision, and Cramer thinks you want an auto stock that’s levered to it. Borg Warner is the one.
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