ATS Automation Tooling Systems (ATS.TO)

There is this pickup in the global trend of manufacturing automation. Trades slightly cheaper than Rockwell, for example. As we see global production picking up they will do well here. Estimates have been reset over the last quarter here and so the company has more attainable growth estimates now. There is organic as well as margin growth possible here.

They have done a couple of takeovers. The backlog before the takeovers is at 56% year-over-year, but if you include the takeovers, the backlog is about 96% going forward. The biggest negative on this is that they have taken on quite a bit of debt for the 2 takeovers. Interest rates are low, so hopefully it won’t harm them as much when rates go up. He has a target price of better than $22.

Automation, and as companies globally are trying to be more productive, they are turning to technology, and manufacturing companies are turning to automation. For Canadians, this is a great way to get exposure to that growing trend of automation. Started to focus more and more on service revenue, which is stickier and higher-margin, so they are going to do quite well here. The trend catalyst for the stock is M&A. Free cash flow is good. Leverage is at 2.9 times and will come down through this period of industrial production. It's getting a fair bit of revenue from overseas. This is one of the smaller players, so there is a bit of risk to it.

The back log increased by 50%. The top brass it too well rewarded and were selling in the past, but not so much recently.

Well run company. It had some notable troubles in the past. Things are improving. The most recent quarter was strong with increased booking and earnings. They export a number of products outside of the country so benefit from the weaker dollar.

Automated production lines in a whole lot of industries. They have a tremendous amount of R&D. Trying to grow by acquisition. He is watching it carefully.

(A Top Pick Aug 20/13. Up 22.44%.) He likes the industrial sector and this is a component that is not overly followed. In Canada industrials have been led by the 2 rails. In that basket of about 21 stocks, half of them are underperformers and they are going to start pulling their weight now.

(A Top Pick Aug 2013. Up 25.77%.) Chart shows a Top last October, and it looks like it is breaking out again with a 52 week, possibly an all time, high. Once you start making a series of 52-week highs, the 1^st one is not your last. There should be more.

(A Top Pick Aug 20/13. Up 19.43%.) Still likes.

His initial sell target on this is $22.24. Reported results yesterday and they were good. They have a record back log which, as a general rule, looks good going forward. Have been backing away from solar, but are moving into other fields. A German acquisition last year has worked out very well. Revenues have gone up. He is still looking for about a 50% upside.

We are seeing lots of spending on automation. Over time has been a great business. The financial numbers show revenues increasing 23%, ROE steadily rising over the last two quarters. An obvious sector to get net investment from the market. Would buy at these levels.

Definite uptrend, lows are getting higher. If fundementals are in place, it's a very good looking chart. Current pullback is a good opportunity.

Be wary of the valuation. You would be coming in when all the easy money has been made.

(A Top Pick August 16/12. Up 57.61%.) He sees this as possibly going over $20. His target price is $22+. They had to deal with the solar problems in France and Ontario and these are pretty much cleared up. Just did an acquisition and sometimes there are write-downs and they take time to digest.

There is a shift of manufacture back to the US that will spill over into Canada. A play on automation and aerospace. There is a base, then it moved up and then another base. We had another move and it could consolidate, moving sideways for a while but no harm done. The story is good and the space is good. Catalyst to send it higher would be when money managers want to get into that space.