Analysis of Auto Parts Industry/ USA
Module: Financial Markets
Module leader: Prof. György Komáromi
Written by László Földvári
I have choosen five companies from the Capital Goods sector / Autoparts Industry/ Nasdaq. The industry analysis is the essence and first step of getting a clearer view of the market players. We have to know the most important macroeconomical circumstances of industry as well. In the following pages I am going to analyze the industry, the choosen stocks and the brother industries. I will try to find explanations for the changes caused by the financial crisis with the help of calculated sigmas, betas and pair-wise correlations for two one-year periods: before and after the fall of Lehman Brothers. Hopefully we can have a broader picture how the financial measure were affected by the financial crisis and WHY? As we all know obviously autoparts is industry seriously depends from Automoblie industry.
Key Players are:
In North America, the automobile production market is dominated by what's known as the Big Three:
General Motors - Produces Chevrolet, Pontiac, Buick and Cadillac, among others.
Chrysler - Chrysler, Jeep and Dodge.
Ford Motor Co - Ford, Lincoln and Volvo.
Two of the largest foreign car manufacturers are:
Toyota Motor Co
Honda Motor Co
Let me emphasize a relevant feature of this industry and studied fact of economy and business cycle, whch can be a correct answer for the changes of stocks. ( Bodie, Essentials of Investment) „ As the economy passes through different stages of the business cycle ( like a recession, or financial crisis), the relative profitability of different industry groups might be expected to vary. For example, at a trough, just before the economy begins to recover from recession, one would expect that cyclical industries, those with above-average sensitivity to the state of the economy , would tend to outperform other indsutries. Examples of cyclical industries are producers of durable goods, such as automobiles or washing machines.” It means that sales are particularly SENSITIVE to macroeconomic conditions. Other cyclical industries are producers of capital goods. Goods used by other firms to produce their own products.” These above writen facts are absolutelly related to the auto parts industry, which could mean that their industry should be very sensitive comparing to other industries. In english the capital goods industry is going to bear the brunt of slowdown BUT does well in an expansion.
I have used historical data of the five stocks to calculate sigmas, betas etc. Based on realized returns we can estimate mean returns and volatility as well as the tendency for security returns to co-vary.
Company Information about the researched firms.:
ARGN: Nasdaq; Cyclical Consumer Goods & Services/Auto / Truck / Motorcycle Parts Amerigon Incorporated (Amerigon) designs, develops and markets products based on its advanced, efficient thermoelectric device (TED) technologies for a range of global markets and heating and cooling applications. The Company's principal product is Climate Control Seat (CCS), which it sells to automobile and light truck original equipment manufacturers or their tier one suppliers. The CCS provides year-round comfort to automotive seat occupants by producing both active heating and cooling. As of December 2009, it had shipped approximately 5.3 million units of its CCS product to customers. Its CCS product is offered as an optional or standard feature on 44 automobile models produced by Ford Motor Company General Motors, Toyota Motor Corporation, Nissan, Tata Motors, Ltd. and Hyundai.
Amerigon stock prices started to fal at the beginning of 2008 . In my understanding it means that they depends on General Motors very much, and that time GM has not so good...