Electric vehicles (EVs) are the cars of the future. We all know it. EVs are coming, and they’re going to replace all carbon-based-fuel cars. It’s going to happen… Just not as fast as everyone is telling you.
There are a lot of obstacles to a 100% EV future. Only about 2% of all cars on the road are electric right now, so there’s a long runway ahead. It’s not going to happen by 2030, or even by 2035.
However, what is going to grow between now and 2030 is the demand for turbochargers. And today, I want to tell you about a company that makes turbochargers for cars, trucks and even big diesel machines that need more power from their combustion engines.
Now, I didn’t realize it until I started digging into it, but turbochargers are a massive market globally, but they’re also a duopoly. There are only two companies in the turbocharging industry.
Garrett Motion Inc.
The first is the one I am bringing to your attention today, Garrett Motion Inc. (GTX). And the other is BorgWarner Inc. (BWA). They control the market.
About 10 years ago, another company tried to break into this market, and they even had support from many buyers. But they couldn’t do it.
GTX and BWA were so far ahead of everyone in their technology that this other company just gave up. So, this is going to stay as a duopoly, and I don’t see that changing very much.
GTX sells turbochargers as original equipment to the auto manufacturers, which is fantastic because once you put one of their turbos into a Jetta, for example, every design for every Jetta for the foreseeable future is going to contain exactly that same turbo.
So, once you make the first sale, the sales are made for you for a very long time to come. That’s a great part of the business. Of course, they also sell them to the do-it-yourself enthusiasts and aftermarket car part markets.
It’s a great story, but it gets better… GTX filed bankruptcy last year, but not because they weren’t selling or they couldn’t pay the bills or they had too much debt. No…
There was an overhanging liability that GTX had that came from being spun off from Honeywell International Inc. (HON) a long time ago that was related to brake pads manufactured before 1985 that used asbestos.
They had been negotiating this thing for a very long time, and HON refused to come up with any reasonable terms to settle it. The bankruptcy filing forced them to the table to have a discussion about who’s going to assume which liability and who’s going to pay what.
They got it done, the court signed off on it and the stock got absolutely hammered because all most people heard was the word “bankruptcy.”
However, post-bankruptcy equities (newly issued stock in corporations emerging from bankruptcy) tend to not just beat the market but slaughter it. But this is a company that went bankrupt for technical reasons and still saw massive selling.
Their equity was never canceled. It came out and moved up a bit, but there are now tremendous opportunities in front of it. They’re going to continue to grow and dominate the regular turbocharger market.
But the folks at GTX are not unaware that there is going to be a future that does not include as many carbon-fuel-based cars. They have developed and have won awards for the first EV turbocharger.
It uses similar principles to regular turbos to get more horsepower out of an electric motor than just the battery can provide. It’s eventually going to go into higher-end EVs and will be a big part of that market.
GTX sees that the market is going to change over time, and they’re going to be ready as they start to work on EV turbos.
They’ve also done something else that is really smart that is going to be another massive market. They are getting into the connected-car cybersecurity market. When cars are connected to the internet, they can and will be hacked.
Just imagine the damage that can be done by hacking into the control systems of internet-connected cars… It’s going to be a massive market. Every vehicle on the road is going to need its own cybersecurity system, and GTX is taking the steps that it needs to take to be a big player in that market.
So, in the short run, GTX will continue to dominate the turbo market, and in the long run the company will get into the high-growth EV market. And all of that is going to drive this stock a lot higher over time.
It’s misunderstood, and nobody is really involved with it except a few distressed security players and some long-term shareholders. But there is tremendous value here.
GTX just announced a $100 million stock buyback program. The officers and directors own a bit of the stock themselves, so there is some skin in the game.
I think this is a company so misunderstood by Wall Street that, as it sits right now, it’s worth twice the current stock price and is going to have enough growth to take GTX to the point that we could get four or five times our purchase price or more.
Subscribe today and receive daily advice right in your inbox, guiding you to a better way to wealth.