Monthly auto sales are being released Tuesday and while there are winners and losers, the overall trend of higher sales remains in place. The thing for investors has been trying to pick the winners among these names.
It’s clear to me American automakers are struggling and losing share. Be that as it may, one way to play the macro trend in autos, entertainment and professional music is Harmon International (HAR).
Auto sales are 56% of the company’s business, but the pure audio part is only $3.1 billion of its current backlog, $13 billion is infotainment, which includes the navigation system and multimedia like the Internet.
Late last month S&P upped its credit rating on the stock to BBB-, which is investment grade, citing the following:
• Improved margins
• Lower business risk
• Expectations of continued leadership position
• Strong liquidity
I agree with all of the above, as cash flow is up 245% compounded from 1Q10. I’m also excited about global growth. BRIC sales were 1% in 2008, 12% this year and will be 25% by 2015 as China alone has a 94% compounded annual growth rate.
Domestically the company's sales are outpacing the overall market, suggesting market share gains.
The company is strong in Lifestyle and Professional, which includes recording, broadcast and equipment for music tours which is the only way artist make money these days.
There are big tech names like Apple (AAPL) looking to get in on the dashboard action and that’s held the stock back. But this is a stock changing hands at a 10 PE, PEG of 0.40, less than one times sales and two times book.
A close above $50 would be monumental and the stock would probably be off to the races.
Charles Payne, a FOX Business contributor, is president of Wall Street Strategies. At the time this article was published he, his firm and/or his family did not own securities in Harman.
Disclaimer: All investment entails inherent risk. Charles Payne and Wall Street Strategies' research seeks to assist investors in determining when to buy and when to sell to attempt to maximize profits or minimize losses. All final investment decisions are yours and as a result you could make or lose money. Wall Street Strategies, its employees and/or its affiliates and family members may from time to time take positions in the open market or otherwise with respect to the securities discussed. Wall Street Strategies, its employees and/or affiliates do not have stock ownership equal to or greater than 1% of the outstanding stock of the covered company nor does any employee of Wall Street Strategies sit on the Board of Directors of any covered company. Wall Street Strategies is not a broker/dealer, and the firm does not underwrite securities, manage assets or perform investment banking activities. The statements made herein include information obtained from sources believed to be reliable, but no independent verification has been made and we do not guarantee the accuracy or completeness of any statements made. The statements made herein contain general information and do not constitute an offer to buy or sell any security.