A True Turnaround Story

Cost savings is about as unsexy a reason as any to buy a stock, but it can be the best tell that something is poised to go higher.

That’s the case with Visteon , a speculative auto-parts company that was spun off from Ford in 2000 and hasn’t been profitable since. Cramer thinks that could be about to change.

Visteon is a pure turnaround play, he said. The catalyst for the stock is a huge restructuring initiative that is rooted in cost savings – the company is slashing overheads (getting rid of unprofitable plants, shedding union contracts, and selling a component business back to Ford) and boosting its numbers, all while the Street is fighting it tooth and nail.

VC’s earnings story tells Cramer that the turnaround is working and the fact that not a single analyst upgraded the stock after its last better-than-expected quarter means you could jump in at the current price and reap the benefits if the analysts start changing their collective tune.

In the meantime, the company is diversifying its sales, relying less on its old parent Ford and now selling to GM , Nissan/Renault and Hyundai among others, tapping into overseas markets.

But VC is speculative and that means there are risks involved. According to Cramer, this company’s biggest risk is its debt; it has over $2.8 billion in debt versus $1.8 billion in cash. It should be turning a profit soon but the debt is still a worry, he said.

Visteon could be the next Lear , as far as Cramer is concerned. It’s a real auto-parts turnaround story that’s focused on the unsexy but important art of cost cutting. Once the analysts wake up and upgrade the stock, Cramer thinks it will be off to the races.

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