Linamar Corp (LNR.TO)

Magna (MG-T), Linamar (LNR-T) or Martinrea (MRE-T)? His preference has always been for Magna or Linamar, and as of late it has been for Linamar. Martinrea is certainly cheap here, but their plant is older and doesn’t quite have the oomph behind it that the other 2 do.

The results have been pretty good. Feels the main reason for the pullback was more of a macro sentiment kind of thing, where a lot of people were talking about peak auto and was at a time to sell anything that was dealing with autos. The results at this company are still really good.

Market Call Minute. A cheap stock, but the overhang is that auto production has peaked.

Get out. If you know anything about the car market, we took so much of the future of car buying and put it into the last three years. These are cyclical. You had to buy it at a single digit price. Just because there is a double digit upside to model price, that doesn’t mean you should buy it. It had a negative transit to EBV -1.

This has a consistent ROE generation, and are fairly attractively valued with a P/E ratio of around 7 or 8. This would be a good position for you.

Linamar (LNR-T) or Magna (MG-T)? Both are great companies. This one is a tremendous success in his view, but Magna is his pick, simply because of its global reach. Its larger size serves a higher number of platforms and has a greater number of products.

(A Top Pick July 13/16. Up 9.39%.) This is suffering because everyone is talking about electric cars. It is going to be quite a while before we get there. This is the world’s largest manufacturer of gears. As the automakers use existing technology to improve gas mileage and moving from the old 3 speed transmissions to 5-6 and going into 9-10, this company’s content of about $15 on a 3 speed, moves up to $40-$50 on a 5 speed, and $150+ on the 9 and 10. Also, likes their Sky Jack business as the US housing picks up.

He follows the industry and owns LNR-T because it is better managed and initiates new programs for the auto industry. It has higher earnings growth. He prefers LNR-T.

Magna (MG-T) or Linamar (LNR-T)? He likes the auto parts space. Just bought Magna for the very first time about 6 months ago, and then doubled his position on June 28. It is his favourite name, but this one makes a fantastic runner-up. This also has the Sky Jack business, which sort of confuses the analysts.

A solid Canadian company. He would categorize Canada’s auto parts companies as good Buys here. They are very cheap. He does not believe there is an auto recession coming.

This seems to be perpetually cheap. They had a good beat in the last quarter. It scores right at the top of the list for him. ROE is consistently at around 20%. Trading at 5X EBITDA with a PE of 7. A great balance sheet which gives them options. Good free cash flow yield. Dividend yield of 5.92%.

Has been buying this in the last 2 months. Valuations got so depressed on peak auto, global recession fears, Tesla, etc. They continually beat expectations, grow margins and show that they can keep up with demand and grow their content per vehicle.

(Top Pick Nov 26/15, Down 25.63%) Good value here. Highly engineered auto parts. 70% of their sales are from Skyjack. It pays a dividend and the founding family owns a big stake, so he continues to buy on weakness.

Switch to Martinrea (MRE-T)? Because she is a large cap investor, her preference has always been more towards Magna (MG-T), but both are good companies. All 3 are trading at very low multiples. Linamar is still a good company. They also bought Sky Jack which is construction and industrial related, which has been a softer market. She wouldn’t make the switch.

6-7 times earnings is ridiculous. Revenues grew 25% last year. People are worried auto sales have reached a peak. Last time sales were here it was 2000 after a booming company. He thinks the share price drop is very overdone.