Opinions
Ross Healy
Lear Corp.
LEA-N
COMMENT
Oct 20, 2015
$0.480
Stock price when the opinion was issued
Automotive
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(A Top Pick Oct 03/18, Down 19%) He's disappointed with its performance, but he continues to buy it, because Lear is till doing good things. 62% of their business is outside America. They trade at a cheap 8x earnings and boast a free cash flow yield over 10%. This should be higher, but the whole sector is out of favour. Be patient.
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Are a tier-one supplier of car OEMs, making seating systems and advance power management. The car industry faces chip shortages, so Lear is effected by the number of units it can deliver to carmakers, but this backlog is starting to decline and normalization is happening. Another tailwind if that electrification will boost the power management business, which boasts high margins. Lear has a good 8% free cash flow. Buy, hold and be patient. (Analysts’ price target is $167.27)
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(A Top Pick Apr 21/23, Up 1%)
Auto parts, attuned to electrification. Very good operator. Not much going on in past year. Technology needs to catch up on EVs so that consumer fully buys in. Poised to do extremely well on margins and profitability. When the stars align, will see a lot of action here. Not if, but when.
Automotive
Auto parts manufacturer. FM value is quite a bit higher than the current price. The P/E ratio is 10.5 times, which is not bad. The bad news, on a Price to Book basis, is that it is now trading at a high since the market bottom of 2008-2009 at about 2.5X BV. For an auto parts Company, that is getting up there. He typically sees them peaking at about 3.5X BV, so there is more room. He can see some upside, but don’t fall in love with it.