12 Undervalued Cyclical Stocks to Buy Right Now

Page 2 of 11

10. BorgWarner Inc. (NYSE:BWA)

Forward P/E Ratio: 7.78

Earnings Growth: 6.47%

Number of Hedge Fund Holders: 27

BorgWarner Inc. (NYSE:BWA) is a prominent player in the automotive industry. The company provides key components for electric, hybrid, and combustion engine vehicles. It operates through four main business segments including Turbos & Thermal Technologies, Drivetrain & Morse Systems, PowerDrive Systems, and Battery & Charging Systems.

BorgWarner Inc. (NYSE:BWA) is making significant strides in the electric vehicle (EV) market, particularly in Asia. It has secured contracts for its High Voltage Coolant Heater (HVCH) technology with three major original equipment manufacturers (OEMs) in Asia.

In China, its HVCH will be used in a fully electric SUV, with production starting in the second quarter of 2025. In Korea, the technology will be incorporated into an electric pickup truck, expected to begin production in March 2025. Lastly, in Japan, BorgWarner Inc. (NYSE:BWA) has won its first HVCH contract for a small battery electric vehicle, with production set to start in 2028. This also marks a notable entry into the Japanese market.

These strategic wins are expected to boost long-term profitability for the company. Moreover, its cheap valuation makes it one of the 12 undervalued cyclical stocks to buy right now.

Diamond Hill Large Cap Strategy stated the following regarding BorgWarner Inc. (NYSE:BWA) in its first quarter 2024 investor letter:

“Other bottom Q1 contributors included BorgWarner Inc. (NYSE:BWA) and Laboratory Corporation of America (LabCorp). Global automotive supplier BorgWarner has faced near-term volatility in the ongoing shift to electric vehicles and hybrids, which has, in turn, impacted results and weighed on shares. Given our expectation this volatility will continue for the foreseeable future, we exited our position in the quarter to upgrade our capital into more compelling opportunities.”

Page 2 of 11