Is BorgWarner (BWA) A Smart Long-Term Buy?

Oakmark Funds, an investment management firm, published its “Oakmark Fund” fourth quarter 2021 investor letter – a copy of which can be seen here.  A return of 4.7% was reported by the fund in the fourth quarter of 2021, compared to the 11% gain of the S&P 500 Index for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Oakmark Fund, in its Q4 2021 investor letter, mentioned BorgWarner Inc. (NYSE: BWA) and discussed its stance on the firm. BorgWarner Inc. is an Auburn Hills, Michigan-based multinational automotive supplier with a $10.4 billion market capitalization. BWA delivered a -3.51% return since the beginning of the year, while its 12-month returns are up by 2.55%. The stock closed at $43.49 per share on January 27, 2022.

Here is what Oakmark Fund has to say about BorgWarner Inc. in its Q4 2021 investor letter:

“We had the opportunity to purchase BorgWarner for a high single-digit multiple of our estimate of normal earnings due to elevated cyclical concerns and uncertainty about the longer term impact of powertrain electrification on the business. Currently, the company’s earnings are depressed due to semiconductor supply constraints that are impacting the entire industry. We expect these constraints to prove transitory, and we’re confident that component shortages will be resolved in the coming years. Furthermore, we believe that OEMs are likely to rely heavily on third-party suppliers, like BorgWarner, to leverage R&D expenses to enhance innovation and speed-to-market in an electrified world. For decades, we’ve been impressed with how BorgWarner management has successfully acquired and scaled fuel efficiency technologies for internal combustion engines. We see strong parallels and underappreciated potential in the acquisitions the company has made over the past 5+ years in key electric vehicle technologies. We believe the company is well-positioned to manufacture and integrate new propulsion systems and components to meet customer demands.”

Our calculations show that BorgWarner Inc. (NYSE: BWA) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. BWA was in 21 hedge fund portfolios at the end of the third quarter of 2021, compared to 27 funds in the previous quarter. BorgWarner Inc. (NYSE: BWA) delivered a -4.06% return in the past 3 months.

In December 2021, we also shared another hedge fund’s views on BWA in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.