It doesn't seem so long ago that investing in anything related to the automotive sector seemed to be an invitation for a capital loss. Companies struggled with excess capacity, high debt and nonviable cost structures, and more than a few companies at least flirted with bankruptcy (and some made the commitment to it).

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Now, though, is seems like a new industry. Many companies have worked to strip costs out of their operating structure and emerging markets have become a major growth opportunity. Though investors should not assume that this industry has shaken off its traditional cyclicality, opportunities could still be available in the sector.

BorgWarner (NYSE:BWA)
Auto part companies do not get much credit (or valuation) for technological innovation, but that seems a little unfair in the case of BorgWarner. Diesel turbochargers and dual clutch technology are both significant growth opportunities, particularly if diesel passenger vehicles become as popular in the United States as they are in Europe. BorgWarner used to pay a dividend and that could resume again as the company shores up its balance sheet. Investors should also note that BorgWarner has less exposure to U.S. automakers than many names on this list.

Federal Mogul (Nasdaq:FDML)
Federal Mogul is one of those auto part companies that did actually go through bankruptcy, but has emerged again as a public company with some momentum in its business. Federal Mogul specializes in engine components, but boasts a fairly sizable (37% of sales) aftermarket business - a business that tends to smooth out the cycles of new vehicle sales. Not only is Federal Mogul looking to expand its aftermarket offerings across multiple price-points, but the company is also moving aggressively to boost its share in emerging markets.

Tenneco (NYSE:TEN)
Tenneco is another company that arguably does not get adequate credit for its R&D, as customers really do appreciate suppliers that can deliver components with better performance and improved features like weight. Tenneco is focused mainly on products in the exhaust and ride control categories and has a reasonably large aftermarket parts business with well-known brands like Walker and Monroe. Growing emerging market business is important here, as is management's decision to expand its offerings for commercial and specialty vehicles.

While many companies struggle to create a defensible niche in the auto parts industry, TRW has perhaps been too good at it. TRW, along with rival Autoliv (NYSE:ALV), has done so well for itself in safety products like seat belts and airbags that it is now the target of a government antitrust investigation. In addition to its sizable safety business, TRW is also active in chassis products and other components. Recently, this company has made significant strides in improving its returns on capital and cleaning up its balance sheet.

Others to Consider
While the prior four auto parts companies offer some pretty interesting stocks at today's levels, they are not the only names worth considering. American Axle And Manufacturing (NYSE:AXL) is a major driveline system supplier and looks undervalued, but gets about three-quarters of its revenue from General Motors (NYSE:GM). Dana (NYSE:DAN), Modine (NYSE:MOD) and Wabco (NYSE:WBC) all merit some due diligence as well.

The Bottom Line
The auto parts industry is not the safest in the best of times, and recent trends in auto sales have been discouraging. However, many of these companies have found multi-year growth opportunities in foreign markets and the globalization of auto and truck manufacturing may help ease some of the historical cyclicality. None of these stocks are conservative and not one of them pays a dividend, but aggressive investors look for some exposure to both industrial and consumer trends should consider this sector. (For additional reading, take a look at Cyclical Versus Non-Cyclical Stocks.)

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