Magna Int'l. (A) (MG.TO)

Down today because of NAFTA concerns. That is going to be a risk, not just for Canada and Mexico, but it’s really a global risk. This is cheap, trading at 8-9 times Forward Earnings. A cyclical name, but they’ve done very well in capturing more of the car. Sold his holdings a while ago because of concerns with NAFTA. Felt the risk was greater than the reward going forward. Dividend yield of 1.93%, which is not high enough to make him want to take on that NAFTA risk.

He worries a little about this whole space. Auto parts in general are obviously a part of the Canadian market that could be severely impacted by NAFTA. The whole industry would be disrupted significantly. On a valuation basis, this doesn't look expensive. He would avoid it because of near peak auto sales in North America and the NAFTA risk.

A safer way to do auto is to do the auto parts manufacturers. This is cheap for a reason but there is still growth. Electric cars will still need parts. It is still attractive and you could see high single digit returns.

He likes all the auto parts. He has owned this one for 5 years. It has always been cheap but now it also has good price momentum. It scores in the top 3% in terms of valuation. 21% ROE. 10 times PE. They are starting to split out their various divisions when reporting and this makes it easier for analysts. Activist investors might pressure them to spin out some of their dividends. (Analysts’ target: $65.00).

Seems to stay quite cheap and reasonable forever. You are battling with all the other situations, concerning vehicle sensitization. He would continue holding this.

(A Top Pick Feb 15/17. Up 29%.) This has done well on the back of very strong Canadian auto sales. More importantly, where they sell to European vehicles, those are still coming along nicely. In the US, hurricanes created more replacement demand than had been expected. The company has done a great job of outgrowing the overall auto industry, and are doing that by getting more content into each vehicle. At the Detroit Auto Show, they forecasted $6 billion of free cash flow over the next 3 years.

Regarding concerns on NAFTA, no one knows what Trump is going to do. He thinks it is a bit of a red herring. Behind the scenes there is a lot of support. 95% of US businesses want to keep NAFTA in place. There is already a NAFTA discount in the whole auto sector, which has created really cheap valuations. This is trading at 7X earnings. Thinks it continues to grow at double digits for the next several years, even in a flat to slightly down North American auto market. It is a leader in autonomous driving technology. Dividend yield of 1.9%. (Analysts' price target is $65.)

There is a NAFTA concern which has kept him on the sidelines, but he is more concerned for the next couple of years on car sales, Peak Auto. There are also some issues on consumer car credits. Electric vehicles is a 10-year story, but will slowly eat into some business. He wants to see a good 1.5 years, to see where car sales are. If you own this, you might consider selling your holdings and looking at something else for the next 6 months to a year.

This company has done quite well. Auto production in the US has been very strong for the past year. Hurricanes in October-November, added a bit of additional demand. Auto parts suppliers tend to all trade at low multiples. She expects we will not see much in higher unit sales in the US. Growth has to come from Europe, and maybe China. We have NAFTA coming up, and those negotiations have not been progressing. If NAFTA gets dismantled, that is a negative for the auto industry.

Thinks the industrial space is going to do well in 2018. It goes with the whole global growth phenomena that is occurring. You are going to have a lot of demand from economies across the world. This is the kind of company that should be able to benefit from this. The stock is cheap on pretty much every metric you can look at. Nice dividend. They are buying back shares. Dividend yield of 2%.

Close to its all-time high, but it looks like a stock that could go higher. For him, it has to get through the $76 level. He would continue to Hold. If he didn't own, he would be a buyer.

Chart shows a fairly decent up channel from early 2016. The question is, will we break above the old high. Because the up channel is so well-established, he thinks there is a decent chance of breaking out above the old highs. The last 2 days of price declines are still way above the middle of the up-channel. This is a buying opportunity.

Linamar (LNR-T) vs Magna (MG-T) vs Martinrea (MRE-T) Has a small position in Magna (MG-T) which is the largest of the three. At this point in the auto cycle in North America, would be very hesitant about adding more. Thinks the bump up in number of vehicles in North America is plateauing. Very cyclical. You can see earnings and cash flow really degrade quickly rapidly. It’s one he would be careful and look for opportunities to sell on strong.

A lot of his customers are worried about NAFTA. It has been dragging on for so long, and meanwhile this company keeps hitting new highs every other day. Feels it is starting to be valued as if NAFTA is going to go away. They have lots of European business which he wouldn't be concerned about. Has a fabulous balance sheet. If they are worried about the N.A. market, they can totally go into any other country and make a really big acquisition. Even if NAFTA is thrown out, investors just like certainty. They can't really value things properly because they don't know what is going to happen. This company could go either way. This will pass over time and they will just keep growing.

(A Top Pick Dec 9/16. Up 20%.) Chose this because he thought it was overreacting to NAFTA concerns and to peak auto. It is still cheap trading at 7.5X versus 10X its US peers. He models 8% per share growth. It's a good balance sheet for M&A. Still a good name to be owning.