Top Picks 2017: Autoliv
01/18/2017 7:00 am EST
As the world moves toward self-driving autonomous autos, there will be great changes in technology, explains international investing expert Vivian Lewis, editor of Global Investing.
Autoliv (ALV) is my growth stock Top Pick for 2017. The company makes non-explosive airbags -- but that is not the full extent of the Swedish firm's ambitions for auto safety.
Autoliv — and its shattered rival, Takata (TKTDY) of Japan — sell their systems to many auto companies in many countries, via an open supply chain. Takata, which neglected safety, will pay as much as $1 billion in fines related to bad air bags.
Takata's airbag crisis is good for Autoliv, which is now moving in on this market and thanks to replacement orders is now the seller of more than half the airbags installed in the USA.
Autoliv's other passive safety products include child seats, collapsing stereing wheels, and side impact and whiplash protection systems.
However, passive safety is not enough to stop a pile-up. You need more active protection. Active protection is the term for systems that activate before there is a crash, to either avoid it or reduce impact.
They are based on electronics that integrate new tech: camera vision systems, night driving assistance, radar, brake control, sensors.
The rise of self-driving cars will vastly increase the need for active safety systems. In my opinion, Autoliv is well placed to get an edge in this business, which is a natural outgrowth of what it does already.
The rear view mirror now found on many modern cars has been replaced by a screen that is made by ALV — a precursor of electronic and radar sensors to come.
Market gossip has it that ALV will buy Takata, although given the broken TKTDY safety culture and collapsing market, the Swedish firm needn't bother. That has held back Autoliv's share price.
Meanwhile, ALV has a low market cap of just under $10 billion and low debt, only 30% of its capitalization. Why ruin this nice picture?
Autliv trades at a forward p/e ratio of 16x current and future estimated earnings; it has high gross margins for the auto industry and pays a 2% dividend. Overall, this is a safe play on car safety.
Editor's Note: Last year, Vivian Lewis chose Veresen (Toronto: VSN) as her Top Pick; is rose 51%. She now says, "This Canadian pipeline operator, was hurt last March when its application to build a plant in Oregon, was turned down by the US Federal Energy Regulation Commission (FERC).
It is appealing the US decision which may be reversed by the Trump administration. Our Canada expert, Martin Ferera, says don't wait for a FERC reversal but buy the stock for its 7.65% yield."