Linamar Corp (LNR.TO)

(Top Pick Feb 13/15, Down 29.71%) He sold out before it went down. The auto sales are down. He is skeptical of the growth in the auto sector.

Auto parts companies traditionally sell at low multiples. Right now we are probably moving towards the back end of the cycle in auto parts. We are still seeing robust auto sales in the US. He owns MG-T, but feels this one is a good choice too.

Magna (MG-T) or Linamar (LNR-T)? Assuming the Canadian government ratifies the TPP, early indications are that it would have a slightly negatively impact on auto parts companies, primarily because it would reduce the content that has to be produced domestically. Auto parts companies are followers. They lag auto companies themselves, which have had a huge run. Getting late in the game. Prefers Magna, but this is a good company and has done very well as a stock. Also, has the forklift division that offers a little bit of diversity.

Linamar (LNR-T) or Magna (MG-T)? 2 high quality auto parts companies. When you think about auto parts, it is really content per vehicle, and you have to assume that that is going to increase. Both companies are doing very well and have a lot of new program wins over the next couple of years, so he thinks we are going to see good content growth going forward. Magna seems to have taken a hit here, and a big chunk of that might be because of its euro exposure, but don’t forget its balance sheet is very strong. On a relative value only, he would pick Magna, but they are both very high quality companies. You could hold both.

Transmissions and engines. Acquired a French company recently. Good company with good dividends and they own Skyjack. They benefit from the lower Canadian dollar. He likes the prospects as they gain market share. They will continue to raise their dividend modestly.

This would be a good choice if you wanted to stay within the car manufacturing theme. However, you are still going to have limited upside. This has a smaller footprint and a little more focus than Magna (MG-T) with less exposure to Volkswagen and some of the global issues. They also have the Scissors Lift company, which is doing okay.

(A Top Pick Feb 13/14. Down 12.16%.) Had been very bullish for some time and overweight on the auto parts sector, but in the last while felt there was some vulnerability. While big auto companies are still cranking great sales numbers, he is not sure that it is actually translating into sales at dealerships. Sold his holdings at around $75 in August.

His problem with auto stocks, as a technician, is that when the news is so bright you have to wear shades; that is not the time to be buying. US auto sales are at record levels. Chart shows a one, two, three correction and he doesn’t think it is over yet.

Larger than expected gains in auto sales should theoretically carry through to the auto parts suppliers. One concern he has that extends beyond the VW issues, is that there are 5 million off-lease vehicles that are going to flood the market in each of the next few years, which could pressure used vehicle prices, and could result in a slowdown of new vehicle sales. These could be headwinds beyond the next 6 months or year that could threaten auto parts suppliers’ top lines. VW is trying to crack down on some auto parts suppliers in order to increase margins. He has been lightening up on his holdings. If looking for an entry point, wait until the company reports, which maybe will give you a better set up going into next year.

One of his favourites. He wonders if they are coming under pressure with trade deals. High Quality, low debt levels with high growth potential. It is a good opportunity to buy this one.

He would buy it here, but if it has a negative transit of $65.82, he would get out of it. There would be much lower prices ahead if there is a negative thing. It wants to hold in here, but he thinks it breaks and goes lower. This is a cyclical.

Linamar (LNR-T) or Magna (MG-T)? Has been hurt recently with the market correction and worries about exposure to China. Recent auto sale figures indicate 18 million cars are going to be sold in North America. He is very bullish over the next 4 or 5 years for the car market. Thinks Magna is the best place to be.

(A Top Pick Aug 20/14. Up 4.09%.) All the car part companies have been pulling back. The China news has affected them more than what has been warranted. Chinese car sales have been weakening, and people have translated that into weaker sales of the car parts. She thinks the European, Canadian and US sales are still robust. This company only has one plant in China. She thinks it has been overdone.

Car sales have done really well, but recently we have seen a lot of stocks like this roll over. Interest rates should stay low and auto sales should be okay. If you like these long term, then you want to buy them when they are cheap. It is not deviating significantly from its long term trend.

There is benefit to the lower Canadian dollar. Chinese growth was projected to continue to drive auto sales, so now you have seen the whole sector roll over. He is short on a similar US auto parts manufacturer (LEA-N). Car buyers are getting longer and longer loans.