Sales Freeze Thaws As Car Sales Warm Up

About Small Caps Article of the Week

Written by Allen Caron

Car sales had an unexpectedly good month in March after a winter sales freeze. The rebound even beat analysts’ expectations, with overall car sales rising 6 percent. Even GM saw an increase in sales of 4 percent following a mid-February recall that affected millions of cars in the US. Though the recall affected the Chevrolet Cobalt, the Chevrolet brand still accounted for 70 percent of GM’s growth in March.

Other automakers also saw growth: Chrysler grew 13 percent over previous-year sales, Nissan grew 8 percent, Toyota grew 5 percent and Ford grew 3 percent. This follows two straight months of declines for many automakers and brands. Overall industry sales in January were only about 1 million vehicles (a 3 percent drop), with February also sluggish at 1.2 million vehicles. In March, by contrast, 1.5 million cars were sold.

Though the big-name brands are the obvious immediate beneficiaries of this thaw on car sales, small cap companies in the automobile industry also tend to rise with the tides. This small cap stocks list includes both OEM and aftermarket small cap companies:

Fuel Systems Solutions, Inc. (Nasdaq:FSYS), based in New York, NY, creates alternative fuel components and systems for both transportation and industrial markets. The company designs and manufactures components to control the flow of gaseous alternative fuels like propane and natural gas in internal combustion engines. In August of last year, the company announced that its subsidiary, IMPCO Automotive, was developing a bi-fuel CNG system for the 2014 Chevrolet Cruze. According to GreenCarReports, the Cruze is the only 2014 passenger sedan with an available and EPA-approved bi-fuel conversion option. FSYS closed April 7th at $10.28, down $0.26, with a market cap of $208.4 million. Its 52 week trading range is $10.02 – $21.44.

Northville, MI-based Gentherm Inc.* (Nasdaq:THRM) develops thermoelectric technologies for a wide variety of heating, cooling and temperature control purposes. The company’s Climate Control Seat^® system, which uses proprietary thermoelectric technology to actively heat and cool automotive seats, is offered in more than 50 vehicles made by leading automobile manufacturers including Ford, GM, Nissan, Toyota, Jaguar, Range Rover and others. On April 1, the company announced its acquisition of privately-held Global Thermoelectrics Inc in an all-cash transaction. The company recently reached an all-time high, trading at $36.36 on April 2 following the announcement of their acquisition. THRM closed April 7th at $32.91, down $1.64, with a market cap of $1.18 billion. Its 52 week trading range is $13.63 – $36.92.

Modine Manufacturing Company (NYSE:MOD), based in Racine, WI, develops and manufactures heat exchangers and systems for both on-highway and off-highway OEM vehicular applications. The company offers power train cooling products like engine cooling modules and radiators in addition to a wide variety of other thermal management products. In February of this year, the company announced its acquisition of Barkell Limited, a UK company that creates custom-built air handling units. MOD closed April 7 at $14.24, down $0.13, with a market cap of $681.78 million. Its 52 week trading range is $8.70 – $15.69.

When the automotive industry sees gains, small cap manufacturers and other players in the automotive space tend to see increases as well. Savvy investors may want to keep their eye on US spending patterns for automobiles. If what’s good for the goose is good for the gander, then these companies could very well be small cap stocks to watch.