The announcement a few days ago by President Obama to increase fuel consumption by 2016 (see CNBC article) still has some scratching their heads, given the head-winds the automakers already face. Nonetheless, it is what it is, so you might as well start considering investment opportunities. A few days ago, Phil LeBeau, the CNBC Automotive Reporter, posted a nice article at his Behind The Wheel blog outlining a few companies that are poised to take advantage of the lower emission and higher fuel economy standards coming down the pike (see the post). The main idea behind the investment opportunities is that to lower emissions and increase mileage, cars will need to become lighter and/or more efficient. Five companies that could offer help in these areas include the following:

  • Alcoa (AA): positioned for the push for lightweight steel and aluminum, while still maintaining strength.
  • Borg Warner (BWA): maker of turbochargers that will give engines the desired performance while still providing for fuel efficiency.
  • Eaton (ETN): auto parts supplier who makes camshafts and valve trains that help improve combustion engine efficiency for existing non-hybrid/electric designs.
  • Honeywell (HON): for the same reasons as Borg Warner.
  • Magna International (MGA): leader in hydroforming, which allows parts, including body panels, to be lighter.
These companies have also been pumped on CNBC's Fast Money recently, causing them to run-up a little, although each are still off their 52-week highs (then again, who isn't). A few are also still consolidating somewhat after the October 2008 sell-off, allowing for some opportunity to move. Of course, in this economy and market, anything related to automakers has to be given pause and due diligence, but each is still worth a look.

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