Investors looking to play the burgeoning electric vehicle trend may want to consider hedging their bets on auto suppliers, according to Goldman Sachs. These companies typically offer more defensive characteristics, including solid margins and free cash flows, even as investors remain relatively cautious on the broader electric vehicle sector against a slowing macro backdrop, wrote analyst Mark Delaney in a Sunday to clients. “We believe that the best set-up for stocks is where there is the combination of achievable Street estimates and an ability to grow even in a sluggish macro,” he said. “Many of the auto suppliers also have more defensive characteristics (e.g. solid margins and FCF, and diversified customers/end market exposure) such as APTV , TEL , and ST .” Key to Goldman’s call is the conservative expectations of suppliers, with many bracing for slower growth and lower volumes relative to original equipment manufacturers. “We attribute this to conservatism from tier 1s after a protracted period of supply driven production weakness, macro demand uncertainty, and a desire to have achievable guidance,” Delaney wrote. Aptiv is one way Goldman recommends playing this strategy, with shares of the automotive technology supplier poised to rally nearly 49% from Friday’s close, based on Goldman’s $138 price target. Delaney also highlighted TE Connectivity as another potential winner. Shares of the sensor maker are up more than 5% this year. Goldman’s price target implies roughly 33% upside from Friday’s close. — CNBC’s Michael Bloom contributed reporting
