Analyst Rankings: When Car Stocks Stall, Auto Parts Keep Chugging

This week, in our focus on the winning analysts in each industry category from our Analyst Rankings -- Equity 2000, we profile the top analysts tracking automobiles. Next week we'll look at publishing and printing. (Our last focus was on health care facilities.)

That auto stocks were down nearly 24% in 2000 was hardly surprising. The cyclical sector saw sales slow as the economy started to cool in the second half of the year. The current outlook for the group is decidedly bearish. No. 3-ranked David Bradley of J.P. Morgan Chase says he's not recommending any stocks in the group with conviction and deems his top pick, auto-parts manufacturer Johnson Controls(JCI), "the only stock in the group he can recommend in good conscience."

The Winners

By name By category By firm Best stock pickers Best firms

All three of our top-ranked analysts cover auto-parts companies as well as auto manufacturers. None has a strong buy recommendation on any of the automakers and all believe auto-parts companies are a better bet in the current market, so we have included their comments on that industry and allowed them to choose auto-parts companies for their top picks.

Compounding the analysts' concern for automakers is the reliance of the Big Three (that's DaimlerChrysler (DCX), Ford (F) and GM (GM)) on light trucks -- a segment experiencing slowing growth and increased competition from foreign carmakers. As No. 1-ranked Steve Girsky of Morgan Stanley Dean Witter sees it, "The sales pendulum is swinging backward while the capacity pendulum continues to swing forward, so you're starting to see increased discounting and margin compression in light trucks."

Among the Big Three, our top analysts agree that Ford is the strongest company overall with the best long-term outlook. But No. 2-ranked Gary Lapidus of Goldman Sachs sees a possible trading opportunity in the near term for General Motors, a stock that he says "has probably been beaten up a lot harder than Ford and thus has a bit more near-term upside."

Still, the consensus among our top analysts is that the more attractive area of the automotive market is the auto-parts segment. Says Girsky, "The cash flow at a supplier is historically a lot less cyclical than cash flow at the auto companies, so we would rather stay with suppliers than auto companies." In addition, Girsky and Bradley observe that the diverse business mix of many of the auto-parts manufacturers also lessens their exposure to cyclical downturns.

Automobiles

	1st Place
	Steve Girsky Morgan Stanley Dean Witter (See Report Card)

	2nd Place
	Gary Lapidus Goldman Sachs (See Report Card)

	3rd Place
	David Bradley J.P. Morgan Chase (See Report Card)

	Best Team
	Morgan Stanley Dean Witter

Rate Their Stock Picks:

Which stock do you like best? Girsky and Lapidus: Lear Corp. Bradley: Johnson Controls

>To order reprints of this article, click here: Reprints