Delphi Automotive PLC

Until Nov. 8, the day of the U.S. presidential election, shares of Delphi Automotive (DLPH) were zooming up the charts after the company reported another solid set of quarterly numbers the week before. But Donald Trump’s unexpected victory sent DLPH tumbling on fears that possible trade wars with Mexico and China would put a huge crimp in sales of automobiles made in America, from which Delphi derives most of its revenue.

The stock dropped all the way back down to our entry price before turning around on Nov. 29. That’s the day Intel announced it was entering into a partnership with Delphi to produce self-driving cars, which negated recent concerns that Delphi may lose market share to the electric car market, which does not require many of the engine components that Delphi provides.

The stock jumped 5% on the news, pushing it back above our buy limit of $65. The average analyst price target for DLPH of $80.94 is well above our target price of $71.75, and we still have almost two months remaining on our target hold period so it appears Delphi is back on track to hitting our target return.

Stock Talk

Jim Pearce

Jim Pearce

Delphi is up more than $5 today, but I haven’t seen any news yet to explain it. The explanation could be as simple as that with 97% of its float owned by institutions and mutual funds, there isn’t enough stock available to accommodate a new round of buying from one of them adding to their position without driving the share price up. Regardless of what the explanation turns out to be, its share price is getting close to our target price of $71.75 so I am watching it closely and will issue an alert if/when it trades above that level.

Dramatic License

Dramatic License

I can understand wanting to get out if we hit target, especially where we were a few days ago, but does this run point to more upside possibly?

Jim Pearce

Jim Pearce

Yes, so when I said I would issue an alert I did not necessarily mean that it would advise selling it right away. In some cases I will raise the stop price to lock in most of our gain while still leaving room for it run on the upside, which is what I may do in this case depending on why it is up so much today. If it is just a temporary supply/demand imbalance then I will probably sell it, but if there is something more than that going on then I may just raise the stop price.

Dramatic License

Dramatic License

Sounds great, Jim. Thanks for the reply.

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