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BorgWarner [BWA
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], maker of turbochargers, dual-clutch and torque-transfer systems, was one of a number of stocks that investors pushed higher as government-sponsored car buying boosted business for many autos-related companies. But this trade has passed, and both technical and fundamental analysts are urged investors to get out.
The charts show that BorgWarner’s 50-day moving average, a measure of the stock’s short-term trajectory, has changed from its support level to its resistance level. The price at which buyers once snatched up excess shares has become the level at which they now think BorgWarner is too expensive. Why? Because the cash-for-clunkers trade is over.
That doesn’t mean this isn’t a good company, though, Cramer said. BorgWarner has a strong balance sheet, and its earnings miss last quarter had more to do with short-term weakness in Europe and increased stock-compensation expenses – both of which are temporary problems – than legitimate flaws in the business plan. Still, BWA is priced for perfection at $30, and Cramer expects the stock to come down.
Investors who want to play the autos sector right now should buy Ford preferred shares, the Mad Money host said. But BorgWarner’s fundamentals may put the stock back in the running “eventually.”
“Because the auto industry’s on the mend,” Cramer said, “and next year will be a better year.”
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