China Automotive Systems (CAAS)
From Cabot Wealth Advisory 7/11/13 Sign up for free Cabot Wealth Advisory
My stock pick this week is really intriguing. Back in 2004, China Automotive Systems (CAAS) was a pick in the Cabot China Investor (the predecessor to Cabot China & Emerging Markets Report, which I write) in the October 21 issue. Then, as now, the company’s biggest product line was components for automotive steering systems, which it sold to makers of both autos and commercial vehicles.
It was a heady time for an auto parts maker, with only 1% of Chinese owning a car and auto sales soaring by 62% in 2002 and 75% in 2003.
The young stock was just starting a long period of roller coaster action that made it hard to buy and even harder to make money on. In 2009, China Automotive began the year trading at 3 and shot to as high as 26 in January 2010. But after that, it was all downhill for the stock until it skidded back to 3 in early 2012.
I’m spending a lot more time on the chart for CAAS than on the company’s great story for one big reason: the chart for CAAS has gone totally ballistic since the beginning of July, ripping from 5.25 to as high as 8 in just seven trading sessions. And that price blastoff is supported by a huge ramp up in trading volume. Clearly, someone has decided that it’s a good idea to own a lot of CAAS.
Ordinarily, I would be talking about the company’s redemption of its convertible notes and the $5 million stock buyback instituted in August. I’d point to its joint ventures with General Motors, VW and Peugeot Citron and its position as a parts supplier for Jeep Wranglers and Dodge RAM pickups. And I’d note its new joint venture in Brazil.
But for now, the chart is the big story. As often happens, a big move in a stock doesn’t always have an easy explanation. We may not know who’s doing the buying, or why, for some time. But for a growth investor, a breakout move like the one CAAS has just put on is always eye-catching. Here at Cabot, we believe in the old adage that “The most bullish thing a stock can do is go up.” So we’ll have our eye on China Automotive Systems. You should too. Read more.
|China Automotive Systems (CAAS)
No 1 Henglong Road
Yu Qiao Development Zone
Jing Zhou, 434000 China
86 27 8757 0027
|Index Membership: N/A
Sector: Consumer Goods
Industry: Auto Parts
Full Time Employees: 3,000