Auto-parts manufactures fail to rev-up investor appetite

The auto-makers have long since hit the fast lane to recovery, but the auto-parts industry remains in the doldrums, with the Financial Times speculating about consolidation. Short selling activity within the auto parts sector can be seen from the peer comparison using the Bloomberg RV function. Despite a sector average of only 1.47% of total shares, the biggest shorts in the sector include American Axle and Manufacturing Holdings (NYSE:AXL), Martinrea International Inc (TSE:MRE), Sanden Corp (TYO:6444) and Akebono Brake Industry Co (TYO:7238). Whilst the first two North American listed stocks have seen an increase in short interest over the past month, the latter two Japanese listed stocks see the inverse.

Axle and Manufacturing Holding’s share price stopped sliding after positive first-quarter results in April. The Data Explorers Bloomberg screen shows that short sellers have continued to maintain their positions with 11% of total shares outstanding on loan (orange line). Institutional owners have been buying into the stock, increasing holdings by almost 25% since March, reaching new annual highs (purple line).     

Bottom Line

Economies of scale and restructurings within the Automobiles and Components sector have created more efficient companies, yet the car makers are actively looking to reduce the number of production suppliers which will further prompt M&A activity.

The Data Explorers Long Short Ratio for Automobiles and Components sector offers a more macro view depicting the ratio of longs to shorts across the key global regions. Short interest (denoted by a lower ratio) is substantially higher in North America, where the sector tops the list as the most shorted sector, and in Europe, which has witnessed increased negative sentiment in the year to date.