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Cramer’s Play on an Auto Recovery
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The U.S. auto industry is coming back, Cramer said Tuesday, pointing to several strong data points.
Dealership operator AutoNation [AN
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], for example, recently said it estimates U.S. vehicle sales will hit 14 million this year. The “chatter” from Volkswagen [VLKAY
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] suggests it could reach 15 million in 2012, even though analysts are expecting just 13.5 million in auto sales. Meanwhile, December auto sales figures showed sharp increases, including a 7 percent pop for cars, 9.6 percent gain for light trucks and a 28 percent increase in the number of small SUVs sold.
Cramer thinks auto sales will be strong in 2012, but to play it, he doesn’t recommend buying automakers, like Ford Motor [F
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] or General Motors [GM
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]. Instead, he likes indirect plays and specifically, the companies that supply the automakers with components.
Take Magna [MGA
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], for example. The company makes technologically advanced components, systems and modules, including anything from seating systems to powertrain systems. It is the world’s largest auto parts supplier and is such a force in the industry that the big automakers can’t push it around. In other words, it has strong pricing power.
Magna’s recent quarterly results weren’t particularly impressive, but it has a sizable backlog, meaning business should be strong going forward. Its stock has run up 22 percent in the last 30 days and yet Cramer thinks it has room to run. He thinks it’s a buy.
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