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Stock Strategist

BorgWarner's Moat Propels Growth

The company is both a beneficiary and an enabler of global clean-air regulations.

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In our opinion, the market has misunderstood  BorgWarner’s (BWA) narrow economic moat around vehicle propulsion technology. The bears have a myopic view of the company’s strategic position, arguing that demand for internal combustion engines is in secular decline, resulting in long-term revenue deterioration.

The bear case conflates traditional ICE powertrain demand and BorgWarner’s core competency while ignoring the company’s economic moat. Even though BorgWarner technologies are used in both gasoline and diesel ICEs, the company’s expertise goes beyond traditional powertrain systems.

Richard Hilgert does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.