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Why Shares of Gentex Fell 10% in December

John Rosevear, The Motley Fool

What happened

Investors in Gentex (NASDAQ: GNTX) had a rough ride in December. Shares of Gentex, a leading global supplier of automotive mirrors and related displays, dropped 10.3% last month, according to data from S&P Global Market Intelligence.

We can probably attribute quite a bit of Gentex's December decline to the broader market sell-off: The benchmark S&P 500 Index was down just over 9% on the month. But there's probably another worry on the minds of Gentex investors: the growing possibility of a big slowdown in car sales in key markets around the world. 

GNTX Chart

GNTX data by YCharts.

So what

Gentex was far from the only auto-related stock to drop by double-digit percentages in December. Shares of all three of the Detroit automakers declined by more than 10%, as did those of key suppliers closely linked to the slumping Chinese new-car market.

A view of the center rear-view mirror in a Cadillac CT6, which is

A Gentex rearview mirror that uses cameras to provide an unobstructed view behind the car is offered by GM on several models, including the Cadillac CT6 shown here. Image source: General Motors.

Gentex makes high-tech automotive rearview mirrors. If your car's mirror does anything more than reflect light -- like dimming itself at night or displaying information -- odds are high that Gentex made it. The company owns about 90% of the global market for such mirrors, which are very common in upscale and luxury vehicles in the U.S., Europe, Japan, and China. 

Obviously, a slump in auto sales that leads automakers to cut production will hurt Gentex's sales as well. Given that passenger-car sales in China fell 16% in 2018 and that the late-November announcement of a major restructuring at apparently healthy General Motors (NYSE: GM) has investors worried that a slowdown in the U.S. could be looming, it's no surprise that Gentex's stock took a heavy hit in December. 

Now what

Gentex will report its fourth-quarter and full-year 2018 earnings results before the bell on Wednesday, Jan. 30. We'll learn more about the state of its China business and Gentex's expectations for 2019 at that time. 

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John Rosevear owns shares of General Motors. The Motley Fool owns shares of Gentex. The Motley Fool has a disclosure policy.