Linamar Corp (LNR.TO)

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.

Auto parts suppliers are very cyclical industries. We have seen a tremendous return to growth in auto demand in the US, and there is a real fear now that we have hit a peak. The latest number he has seen was 18 million cars in the NA that are going to be sold. People have to keep in mind that we went through several years, post the financial crisis, of selling 11 million or less cars, so there is this pent-up demand that we are chewing through. This, and Magna (MG-T) are leaders in their field and both do a great job. Both are considered cheap right now. When auto sales turn over, there will be a contraction in earnings, but OEMs will feel it much more so. This company will be reporting shortly, and he expects good numbers.

Doesn’t rank really high in his process, but from a technical standpoint it is starting to base and turn up. This is going to continue to get more pieces of every single car.

Magna (MG-T) or Linamar (LNR-T)? Both names are very attractive right now. Both are trading at all-time compressed Price earnings multiples, and are both under a little bit of pressure because of their exposure to Europe. 25%-30% of this company’s sales come from the euro region, and Sky Jack, which they own, has about 10% exposure to the UK. He prefers Magna. Also, doesn’t believe this one is in a position to start capturing the big trends in the electrical vehicles.

(Market Call Minute) He does not like the original products manufacturers. He prefers the secondary market.

They think the pace of sales will keep up. 7 times earnings. They are going from $50 in every transmission, to $150 in transmissions with more gears.

Feb. to May of each year it is positive. Now the stock is drifting lower and testing a support level. Better opportunities exist elsewhere.

Has not been a great cheerleader for auto stocks because of the volatility. If you want to get into auto stocks, you might think of something like Magna (MG-T), which is much larger and with a less volatile performance over time. He can see the auto market still chugging along. There are a lot of people who don't think this is going to happen. If you see it move ahead 5%, that would be the time to step in.

(Market Call Minute.) Linamar (LNR-T) or Magna (MG-T)? Both are great companies and this is a sector that he likes very much. He prefers Magna because of its world spanning line of factories and very solid management worldwide.

The rule of cyclicals is that you sell them when PEs are low and buy them when PEs are high. The PE on this is dirt low right now. Over the long-term you are going to be fine, but in the short run this is still dead money.

His view on this is tempered by the environment they live and work in, which is all the company can do. The company is a really well run auto parts company. The problem is, auto production seems to have peaked and is starting to head down. They have probably seen the best in the business for now. For 12-18 months, it is probably not going to be a place to be, but towards the end of that and into the next auto cycle, it will be well positioned to Buy.

Magna (MG-T) or Linamar (LNR-T)? Doesn’t own either, but if she had to choose, she would lean towards Magna.

(Market Call Minute.) It just struck him today how poorly the auto parts and auto stocks are behaving.

(Market Call Minute) His favourite of the motor parts companies.