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Unexplained Price Movement

Whether they are self-driving, electric, diesel, or gas, all cars need seats. The leading manufacturer of car seating, Adient Plc, was recently spun off from Johnson Controls in the Fall of 2016. Adient controls over 30% of the market share, making it the largest seating producer in the world. The stock has run up 30% from $50 to $65 dollars per share without a clear basis for the movement. The company's past performance, while operating under Johnson Controls, is clouded in ambiguity. Even Bloomberg cannot give concise numbers of the company’s full historical performance, which is understandable given the company’s recent inception. The reason this ambiguity is important is because it leaves no answer as to why the stock has run up so significantly.

As I previously mentioned, the stock has run up 30% in the 6 months since the spin-off. Many investors look at historical performance and in-depth statement data in order to make a price projection or at least to help determine a valuation of the company. The only coverage it receives is from J.P. Morgan, yet shares have shot well above their price target. The future is unclear for the company, but that did not stop investors from buying it up at a premium.

Of course the bullish trends in the automotive sector could have provided influence to make the purchase, but other than that, very little has changed within the company to justify this price action. Adient has not even reported a full independent quarterly report, as their first report will be on February 3. The nature of the price movement leads me to believe that investors who are closer affiliated with the company before the spinoff and understand its prospects may be putting money into the company, which bodes well for its expected future performance.


Of course, this is type of analysis is extremely imperfect and does not come close to being an investment rationale, however it is important to try to understand the motives of different buyers and sellers. Price movement cannot always be attributed to extraordinary performance and it is important to consider alternatives. In the end, understanding the motives of the person on the other side of a trade can help one to better understand the pros and cons of the company itself.

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