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

NAFTA is something that you want to look at. Whether or not Trump goes down that road and amends or repeals it, it is going to have an effect on a company like this. The stock is very cheap at around 7X earnings. Still has a pretty decent growth rate.

A global leader in auto supplies. They reported good earnings recently. They are continuing to execute their business plan. However, auto sales could be peaking. He thinks they will grow through this. They are a global player so a Trump effect on the auto pact should not be a huge factor.

Somewhat controversial because people are convinced the auto cycle is turning down. However, if you are convinced that Apple or anyone else is going to get into the business, someone still has to make the physicals which is where this company comes in. 13% trailing free cash flow payout. Has an attractive .17 to EBITDA growth rate. Earnings are expected to grow 13% both this year and next. 21% ROE. Dividend yield of 2.55%.

(Top Pick Aug 29/16, Up 4.37%) They had a nice bounce. There is a lot of skepticism about the auto sector. He does not think production will go back to trough levels before 2009. He still thinks there is upside here. They are outperforming the rest of the sector.

He is on the fence with this. Their last quarter was really strong. They had improving margins in a lot of their business lines. From a technical perspective, it is right at the point where it could be a buying opportunity. On the other side, pundits are saying the auto industry is at its full capacity, and will probably be going down. This is a really well run company, and have proven that they can weather storms, and make changes to their business to make it through tougher environments.

Looking at the macro view, auto sales in the US are trudging along at about 17 or 18 million, which is at about the high. A lot of people thought that was a peak and we were going to see a decline, but that is not happening. The auto parts companies have been down, which reflects the fear that auto sales will slow. If you own, he would hold onto this until you see if US car sales sustain themselves.

Very cheap, but it just can’t get a break. Folks feels there is peak auto out there, and are very concerned. Last quarter they rose their guidance from the high 7’s to the high 8’s. He models that they can grow their EPS 16% each year over the next couple of years on 9% revenue growth. They are still doing a buyback. Very strong balance sheet. Cheaper than their peers, and the whole segment is very cheap. 2.5% dividend yield.

(Market Call Minute.) Auto parts group and assembly have been a tough group. Relative to the group, this one is making a nice turn. A great entry point.

This has 2 periods of seasonal strength. From now until the 1^st week in January and during the auto buying season from March and April into May. Technically this has established an upward trend. It is encouraging that technicals are starting to come around just at a time when seasonality starts turning positive.

(Top Pick Jan 22/16, Up 13.38%) World class company transitioning to outside management. Some think auto sales will go down 30-40%, but he disagrees with that figure. There is potential for smart cars. They have a good solid balance sheet.

Linamar (LNR-T) or Magna (MG-T)? Both are great companies. This one 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.

They have had trouble over the last year or so. He would give it a 7 out of 10. You might just get a run back up to $70. The story looks okay so far.

A lot of these auto parts companies have come off quite a bit. He does not think we are at the end of the auto cycle. Every month there is a sharp selloff. He thinks their earnings will grow so continue to hold it.

Like many auto names, it has really seen its share price decimated over the last 1-1.5 years. In this space, this would be his favourite company. In 2015, auto sales peaked and since then the entire space has seen some downside. However, at the current valuations of 8X PE, it is pricing in a fairly deep recession. Although he is negative on global growth, everything has a value that it makes sense to own it at, and this one makes sense to him. Over the next couple of years, he could see 10%-15% upside. Dividend yield of 2.25%.