Delphi: Navigating gains in auto accessories

This auto sector turnaround is attracting big bets from some top hedge funds.

By TheStockAdvisors May 9, 2013 12:05PM

Car on stack of money © Dynamic Graphics JupiterimagesBy Nicholas Vardy, Bull Market Alert


Delphi Automotive (DLPH) is one of the nation's largest automotive suppliers and a leader in integrated audio, video and navigation systems that keep the nation's drivers both informed and entertained while driving.


Delphi also makes collision warning systems now required by law on all new automobiles. Here's why Delphi's stock has been in a steady uptrend and why I believe it will continue rising in the months ahead.


First, the advanced safety features on U.S. automobiles aren't just high-end options any more. They are required by federal law.


Second, Delphi's prospects have improved along with the rebounding U.S. car market. This year, U.S. manufacturing industry sales of new cars and trucks will exceed 15.3 million, up from 14.4 million in 2012.


By 2015, sales of new cars and trucks will hit 16.4 million annually. And a lot of these cars will be equipped with Delphi-manufactured products.


Third, Delphi is a turnaround play that is just getting started. The company recently dumped much of its unprofitable European businesses. Although the company has to write off $300 million over the short term, the restructuring improves Delphi's longer-term outlook.


Delphi's revenues are projected to climb about 9% annually over the next few years, lifting sales to $22 billion by 2016 from $16 billion today. Earnings per share will expand even faster -- about 18% annually, or 95%, over the next 48 months.


That's also why Delphi's price-to-earnings to growth (PEG) ratio, which incorporates both the price-to-earnings multiple and analysts' consensus estimates of earnings growth is a mere 0.6, making the stock extremely attractive at current levels.


No wonder Delphi is attracting some big bets. Centerbridge Partners, a $1 billion-plus hedge fund, has bet an astonishing one-third of its portfolio on Delphi.


Billionaire Dan Loeb's Third Point had at least $50 million invested in Delphi at the end of December. John Paulson also owns 13.5 million shares.


The stock recently hit a new 52-week high on the heels of its earnings report. Revenue was $4 billion and in line with consensus estimates. But the $1.07 earnings per share number versus an analyst consensus of $0.95 earnings per share was much better than expected.


More from TheStockAdvisors.com

Tags: DLPH
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

115
115 rated 1
269
269 rated 2
445
445 rated 3
614
614 rated 4
684
684 rated 5
678
678 rated 6
608
608 rated 7
454
454 rated 8
310
310 rated 9
138
138 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.