“Crack this “Misunderstood” Stock… And Unlock a Fortune!”
August 10th, 2008 by StockGumshoeChange the text size:
For your Sunday reading pleasure — this is a solution sent in by a fearless Canadian reader who likes to call himself “Tease This!” I haven’t done much more than a touch of editing and have not researched the company at all … but perhaps it will pique your curiosity and get you diggin’. If so, feel free to let us know what you think.
The ad is for the Motley Fool Stock Advisor, the flagship newsletter from the Gardner brothers … we can make fun of them for pushing Whole Foods as the New American Super Brand for as long as they have (close to 2 years now, while the shares have fallen by well over 50%), but they do have a good long term record overall (beating the market for the last three and five year periods).
What do they want us to buy today?
“We’re talking a rare breed of stock. A single investment that combines the staggering power of the best growth stocks… with the equally awesome wealth-building power of acquiring them at a big discount.
“Our founding Fools, David and Tom — whose total average return is 40% while the S&P 500 is up just 4% — call these underappreciated value stocks with explosive growth potential “misunderstood.”
“Which is our way of saying “the market doesn’t get it.” IN FACT, most people might not even recognize such an investment is possible…
“Yet for the group you’ll meet in a second, this could be another historic moment!”
And then, the specific stock that Tease This! sniffed out for us:
“A misunderstood sleeper industrial company… with green solutions!
“Now consider this unloved, gritty multibillion-dollar auto parts manufacturer has already enjoyed revenue growth of 12% a year for more than a decade, rewarding astute investors 15% annualized gains.
“And these returns are accelerating… In the past FIVE years, its stock price has grown at a staggering annualized rate of 19%. And since the stock is currently bargain priced relative to its potential, this trend looks to continue for many years to come.
“[This company's] breakthrough turbo technology improves diesel emissions.”
– Fox Business, June 19, 2008“But here’s why we must act fast: Wall Street is beginning to catch on… A few weeks ago, Citibank and Wachovia upgraded this company to a “strong-buy.” And the herd can’t be far behind… Morgan Stanley, UBS Warburg, Merrill Lynch, JPMorgan, Goldman Sachs, and Deutsche Bank are still calling it a ‘hold.’”
Tease This! tells us that this company is certainly …
Borg Warner Inc. (BWA)
So, since this is a lovely Sunday in August, I’m guessing that there are about three of you reading this today. Whaddya think? We looked at another old school industrial company in Corning that’s also working at greener engine technology (in their case, diesel particulate filters), but otherwise I haven’t looked at any auto sector stocks for a long time (except for the good ‘ol “electric car” promises that we see every now and again).
It is perhaps the nicest day we’ve had in Washington, D.C. since May, so that’s enough from me … throw this one around, or go back to your cold drink with an umbrella, your choice. I’ll be back in business on Monday, I’m planning on digging into some “sin” stocks for your dirty, stinky, and soused pleasure …
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The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.
August 10th, 2008 at 9:32 am
when will Carrottrader set up a way to sign-up without using Paypal.
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StockGumshoe reply on August 10, 2008 3:34 pm:
I’m pretty sure that they have another credit card option, too, but you might have to contact them to use it. I know some of their customers don’t use PayPal.
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Carrot Trader reply on August 11, 2008 6:33 am:
Paul - we offer two payment options: credit card and PayPal.
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August 10th, 2008 at 9:55 am
BWA presents an intereesting pattern. A print at $45 breaks the second double top. Trendline is at $48 so you would need to see how it trades there. Breaking $38 is a tripple bottom and not good. Could send the stock to around $21.
http://stockcharts.com/def/servlet/SC.pnf?c=bwa,P
If you own this one, how about selling the January $45 calls for around $4.40. Static return is around 20% and gives you 8% downside protection. Be sure to read the options disclosure to get an idea of the risk.
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August 10th, 2008 at 10:04 am
In case there’s more than 4 of us (counting me)reading this today…Does anyone have any thoughts on Fuel Systems Solutions (FSYS)? What cause the sudden run?
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stbdtack reply on August 10, 2008 9:45 pm:
Sure. They had a superb quarter. They have two divisions, one being an Italian company that has been making CNG and propane carburetors and other related stuff for cars for decades. When natural gas or propane (this is a byproduct - one of many - from “wet” natural gas that is processed before entering the distribution pipelines) is cheaper than diesel or gasoline, or is needed in order to comply with clean air regulations, the solution is to modify the engines to run on ngas or propane. Been done forever in Europe. Here is part of the description for the U.S. division, called IMPCO (from their web page):
“IMPCO Technologies Inc. is the world leader in gaseous fuel carburetion components for internal combustion engines from 1/2 to 5000 horsepower.
The Engine Component market serves a substantial, world wide, conversion market as well as retro-fit and repair for cars, trucks and industrial equipment.
Working with our distributors and OEM’s we have developed complete systems packaged in modules to included everything required for a successful alternative fuels conversion.
Simplifying the conversion process enables IMPCO to retain a commanding presence in the alternative fuels conversion marketplace.”
Nothing new or high tech about this. Just good old common sense, and a well-managed company that is in the right place and time with the infrastructure and capability to meet the needs of industry and fleets in California that need to meet emission standards. It works; it is reliable; and propane is abundant, as long as natural gas is being processed. It is stored this time of year by local Utility companies, in large tanks above ground, ready to mix with air and inject into the natural gas pipeline (to match the lower BTU content of natural gas) to make up for supply shortages in the winter when there is high demand for natural gas. I don’t know the current big picture, but before LNG came on the scene, we used to have interruptions of natural gas to industries in coldest weather, so that homes could have heat. If enough LNG comes into the market, there may be less need for propane/air emergency backup systems for industry, and less industrial propane usage, which would make more propane available for vehicles at reasonable prices. Propane used to be very pricey at certain times of the year - large seasonal price fluctuations. But I digress. Used to be my business.
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August 10th, 2008 at 1:48 pm
According to the email I got from fool.com the stock in question is CPRT.
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StockGumshoe reply on August 10, 2008 2:59 pm:
Might be a different email or one of the other companies teased in this multi-part email — I know the Fool has touted Copart before, but it’s an auto salvage auction company, not a parts manufacturer or technology developer.
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August 10th, 2008 at 7:00 pm
Copart has been pushed for a while by MF but I have resisted the tempatation thus far. BWA is worth researching anyway. Tease This… Thanks for the sleuth work.
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August 10th, 2008 at 8:37 pm
BWA was indeed a MF Stock Advisor recommendation. (Feb 2003, up 2.2x since)
So far as I can see they last touted it in Aug 2006. In Nov 2007 it was ‘pricey’.
My 2cents: BWA is one of the few good auto related stocks (JCI is another) but the next few years may not be the era of such stocks. If cared to pay the gains (and if I had a better idea for placing the money) I would probably sell right now. Regardless, I’m not buying–but please show me tyhe error of my ways.
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