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Armigon: Building Secular Growth by HVAC and Car Seats

|Includes: THRM, Tesla, Inc. (TSLA)

I have been accumulating the high-tech auto parts manufacturer Amerigon.  I only use limit orders with this company.

While researching Tesla (NASDAQ:TSLA) for the IPO I did not buy.  I came across Amerigon (ARGN), maker of thermoelectric components for heated seats.   Amerigon is the premier manufacturer of thermoelectric devices for cars.  They also have other product lines and high-tech thermoelectric devices.  And I like that their customer base is highly diversified, with over half of their sales coming from outside the U.S. Makes sense, seeing as most cars are made outside the U.S.

Here's a brief company summary:

    •    Has a unique product.
    •    Is debt-free.
    •    Has been outperforming its competition.
    •    Its earnings growth is tied to comfortable car seats, and comfort is an ongoing trend.
    •    According to First Call data has 40% forward earning growth rate--very high for its industry.
    •    Has recent positive earnings news.

Below I've included a list I give to my interns, the set of qualitative questions I always ask myself before I invest:

1. What are the company's main products?
Amerigon's primary product is the Climate Control Seat, a heating/cooling seat sold to automotive and truck manufacturers. The company has sold over 5 million CCS seats to date, now offered in over 40 vehicle lines.

2. Why is this product special? Is it unique--and can it be copied?
For Amerigon, I'll want to know how the Climate Control Seat technology works. In a nutshell, it can heat or cool a small area (like a single seat) with little effort--it's the best method for personal climate control.  ARGN currently holds a patent on this product and several others in testing.

3. Who runs the company? And what was his/her prior position?
Daniel Coker was appointed CEO in 2003, and earns an annual salary of $291,000. Prior to this, he served as Vice President of Sales and Marketing, a position he held since joining Amerigon in March 1996.

4. Who are the company's biggest clients?
Ford, General Motors, Toyota, Nissan, Jaguar/Land Rover, Hyundai, Honda and Kia. Half of Amerigon's revenue stream comes from outside of North America.

5. Who are the company's biggest competitors?
Leggett & Platt, Inc. and Magna International, Inc.

6. What are the potential problems?
ARGN is highly exposed to the global automobile market.  Any decline in global auto sales means lower sales for Amerigon. And because CSS is the company's principal product, any problems with its production or superior technology will destroy Amerigon's principal earnings base.   

Trading Warning:
Amerigon stock is not particularly liquid.  I would only buy or sell using limit orders--I cannot emphasize this point enough.

David Neubert owns ARGN.  My intern, Jason Diemer, has ARGN in his Neubert advisory portfolio. David Neubert owns a car with a climate controlled seat, but it isn't made by Amerigon.  On Aug 8 Neubert bought 800 shares of ARGN for $9.70.  On July 23, Neubert/Diemer bought 107 shares for $9.27.  Neubert currently has a good-till-cancelled limit order at $10.50.

Disclosure: Long ARGN, No Position TSLA,