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Buy General Motors? Buy Borg Warner

General Motors (GM) re-joined the party last week. By "the party" I mean the stock market party. After GM began trading on Thursday shares traded up to about $36 per share before pulling back close to the IPO price of $33 at one point on Friday. GM will probably be a good long-term investment as the company has been primed for profitability.

With that said I prefer buying Borg Warner (BWA). BWA is the leading auto parts manufacturer of fuel efficient engine and drivetrain components. Barron's wrote favorably about the company last week, Borg Warner Gears Up For Growth, November 15, 2010.

According to Barron's GM accounts for only 1% of Borg Warner's revenue. In addition the US has been slow to adopt the fuel efficiency standards that other countries have already adopted. That leaves lots of upside for BWA. China is currently filling a seemingly insatiable demand for autos, also fueling BWA stock.

BWA isn't exactly cheap at close to 16 times next year's projected earnings. However the company is the market leader and is trading at a discount to its historic multiple. With an improving economy, stricter fuel standards worldwide, and growing emerging markets Borg Warner should power ahead.


Disclosure: Long BWA
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