As GM Implodes, Hawk Escapes Auto Tumult

The U.S. car industry is on the brink of collapse, and companies are facing scorn and scrutiny from consumers, investors and the government. As a result, auto stocks have been squashed, yet one premium-components manufacturer, Hawk Corp.(HWK Quote), has been spared.

TheStreet.com Ratings' quantitative model rates 53 auto and car-components stocks, of which the micro-cap Hawk is one of two that has received a "buy" recommendation. In fact, the company was upgraded earlier this month.

Hawk, whose customers include Nascar and the American LeMans Series, is likely to outperform "sell"-rated industry competitors Wabco Holdings(WBC Quote), Arvin Meritor(ARM Quote), Lear(LEA Quote) and Tenneco(TEN Quote).

Hawk's stock has risen 12% in the past three months, exceeding the Amex Composite Index's 7.4% return and bringing the Cleveland-based company's market value to $159 million. Shares of General Motors(GM Quote) and Ford(F Quote) have dropped 44% and 3% during the same period, respectively.

Hawk's third-quarter net income jumped to $10.26 million from $1.66 million a year earlier. During the most recent quarter, its gross margin widened to 36.3% from 26%, and the operating margin increased to 21.08% from 8.84%. A quick ratio of 3.15 indicates a strong liquidity position. Hawk is trading at a discount relative to its industry peers based on price to earnings and price to sales, but is expensive based on price to book and price to cash flow.

Hawk sells to a diverse group of buyers, and its products are used in aircraft, construction and agricultural vehicles, trucks, motorcycles, race cars and all-terrain vehicles. The company sells to original equipment manufacturers and in the auto-parts aftermarket. That diversification has helped Hawk outperform when its competitors are hurting from the pullback in discretionary spending and the decline of the Big Three.