It never fails. When there is a big corporate misstep, the over-reaction crowd, which is often event-driven hedge funds selling short, takes over briefly. The Volkswagen emissions scandal is another textbook example of this. A new report from Stifel maintains that the top companies with exposure to the German auto giant have low percentages of overall business with them.
The Stifel analysts maintain that while the auto component suppliers have significant overall automotive exposure, none of them is so over weighted to VW that there should be any long-term damage. In fact, they estimate that VW represents less than 5% of sales for the companies in the firm’s coverage universe, with North American share significantly lower.
They also think the sell-off is over-done and investors have a chance to buy some of the top stocks at outstanding levels. Here are three that are rated Buy at Stifel.
This top stock is down a stunning 25% since April. Sensata Technologies Holding N.V. (NYSE: ST) is one of the world’s leading suppliers of sensing, electrical protection, control and power management solutions with operations and business centers in 16 countries. Sensata’s products improve safety, efficiency and comfort for millions of people every day in automotive, appliance, aircraft, industrial, military, heavy vehicle, heating, air-conditioning and ventilation, data, telecommunications, recreational vehicle and marine applications.
The Stifel analysts estimate that Volkswagen accounts for 5% to 7% of sales to the company, primarily from Europe and China, where the company sells predominantly gasoline-based cars. The VW issues are primarily diesel engine vehicles. While there could be a near-term lower demand from VW, the analysts remain positive long-term on the company and believe Sensata remains well positioned to take advantage for content growth and should see leverage as mergers and acquisitions related costs come out.
The Stifel price target for the stock is $58. The Thomson/First Call consensus target is set at $57.92. The stock closed trading on Wednesday at $43.49.