The U.S. auto recovery will likely be one of the hottest trends in 2012, Cramer said Friday, adding American Axle & Manufacturing is a great way to play it.
With a market cap of just $850 million, it is an $11 stock. To Cramer, it’s the perfect pick for “Speculative Friday.” He thinks it has terrific prospects.
American Axle makes driveline and drivetrain systems, which are the components that transfer power from the transmission to the wheels, drive shafts and axles. It has a three year backlog of $1.1 billion worth of business, which is enough to produce double-digit annual revenue growth for some time. Plus, it has no real exposure to Europe.
American Axle’s stock has gained 14 percent since the beginning of the year, but has lost 23.7 percent over the last 12 months and is 63 percent off its 2007 highs. To Cramer, it’s a bargain.
It’s worth noting, though, this is a speculative play because it has ultra high levels of customer concentration with General Motors accounting for roughly 70 percent of its revenues last year. Even as GM has been going gangbusters, Cramer thinks that’s unhealthy. It’s moving in the right direction and is currently quoting more than a billion dollars of new business opportunities, of which 90 percent are new customers.
“Take some time, do the homework, then if you like what you see, I’d start putting on a position before the company reports in two weeks,” Cramer said. “Then add more if the stock sells off, either on the quarter or a market-wide Europe-inspired pullback.”
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