NEW YORK (MONEY Magazine) -
It's been a gruesome year for Detroit: General Motors and Ford debt downgraded to junk status; gas prices at record highs; and car-parts maker Delphi in bankruptcy.
The S&P auto-parts index is down 29 percent through late October. But not all auto-parts companies have labor-cost woes on a par with Delphi's, and many have sales growth that GM execs can only dream of.
"Some decent stocks are coming under pressure," says Joseph Amaturo, an analyst with Calyon Securities. And that could mean the chance to buy good stocks cheap, if you are willing to go against the grain.
Amaturo likes engine maker Borg-Warner (Research) because Ford, GM and DaimlerChrysler accounted for less than half of sales last year.
He also likes drive-train manufacturer American Axle & Manufacturing (Research), which could surge if gas prices moderate and SUV sales rebound.
Rod Lache, an analyst with Deutsche Bank, upgraded auto-interior and battery maker Johnson Controls (Research) following the Delphi bankruptcy. The company, which generates less than 40 percent of sales from the Big Three, recently raised its fiscal 2006 sales and earnings estimates.
Gentex (Research), a manufacturer of rearview mirrors, reported better than expected third-quarter earnings in October thanks to strong demand from Asian car makers. Gentex is a favorite of Robert W. Baird analyst David Leiker, who wrote in an October report that the parts sector is now so cheap that contrarian money managers looking for bargains are "kicking the tires" on the stocks.
To that end, Curtis Jensen, manager of theThird Avenue Small-Cap Value fund, a MONEY 50 pick, said wheel maker Superior Industries (Research) and American Axle are good bets.
"There's good reason to be skeptical" about the industry's prospects, he admits, "but it seems the pendulum has swung too far in terms of the share prices."
Neither Superior nor American is burdened by debt, Jensen says, and that can help them handle rough roads.