Autos

Volkswagen Scandal Has Affected Auto Component Suppliers: 3 to Buy Now

TE Connectivity

This stock is down a whopping 15% in the past two months. TE Connectivity Ltd. (NYSE: TEL) designs and manufactures products at the heart of electronic connections for the world’s leading industries, including automotive, energy and industrial, broadband communications, consumer devices, health care and aerospace and defense. TE has a long-standing commitment to innovation and engineering excellence that helps its customers solve the need for more energy efficiency, always-on communications and ever-increasing productivity demands.

Many on Wall Street are bullish on the stock due to the increasing electronic content in automotive, industrial, consumer and defense industries. Analysts cite the stock’s very reasonable valuation and the high-growth auto sensor business helping to ramp up sales and earnings. While VW accounts for about 5% of total sales, the Stifel analysts think there will be little if any meaningful material impact as the company has such broad overall market exposure. They also think TE is well positioned long term to take advantage of content growth in the automotive market. Another positive is the $3 billion in share buybacks outstanding, which is expected to be completed within a year.

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TE investors are paid a solid 2.25% dividend. The Stifel price objective is $74, and the consensus target is $74.55. The stock closed Wednesday at $58.81.

TTM Technologies

This stock is down over 40% since June and could have very solid upside potential. TTM Technologies Inc. (NASDAQ: TTMI) is a major global printed circuit board manufacturer, focusing on quick-turn and technologically advanced PCBs, backplane assemblies and electromechanical solutions. TTM stands for time-to-market, representing how TTM’s time-critical, one-stop manufacturing services enable customers to shorten the time required to develop new products and bring them to market.

The Stifel team points out that the company has about an 18% exposure to the overall auto market, which it gained through the acquisition of Viasystems. Given the absolute evisceration of the stock, aggressive accounts may have an awesome trade here with the potential for a retracement of the big decline.

The Stifel price target is $11, while the consensus target is $11.63. The stock closed trading on Wednesday at $6.24.

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Like all headline risk stories, this too will go away in a very short time. Like the political commentary that hammered biotech and big pharmaceuticals, the bark is always much worse than the proverbial bite.

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