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

It was lower yielding and then had a great run, then came off perceptively. He questions the growth side in the auto industry. He wants to buy it after some of the steam comes out of the balloon. Wait for the next recession.

Seasonally, the automobile sector starts near the end of February, and typically lasts into April. That is when most car sales take place. There has been a bounce off the low $40 level which is good. We might see it hold back at around the $58 level. The chart is looking quite good right now.

Looks ridiculously cheap, and it is a great company. Some of issues are their exposure to Volkswagen, a bigger exposure in Europe where they have weaker margins, and a lot of people think the car cycle is over and production will roll over. Because of this it is hard to do a valuation and she would not rush in to buy this. She has a Short in a pairs trade on this.

Not a fan of auto parts makers at this point. In the US market, they are still seemingly doing quite well. Revenues coming from overseas are where the problems lie at this point. The stock is below the 50 and 200 day moving averages. Trend lines are purely negative at this time.

Trading at only about 7X this year’s earnings. Even with reduction in earnings estimates, he is seeing about 3.5X operating cash flow. Have good exposure in European growth. Good balance sheet.

Seasonality for this and the auto industry in general is from around the end of February right through until May of each year. The key is to watch for the possibility of the seasonality characteristics coming into the stock sometime around the end of this month. Technically, it is not so good right now. It’s in a downward trend and is underperforming the market. Short-term momentum indicators are still on the downside. Around the end of this month, if the technicals start to show signs of bottoming, that will be the opportunity to Buy.

Autos are so cyclical. It can change from a boom year to a bust year so quickly. F-N is 6-7 times earnings. This is a theme that works right across the board. Auto parts is a more defensive area than the automakers. His opinion on the auto sector is somewhat muted. The low PE is because the sector is so cyclical. Don’t be fooled by it.

An interesting story. Not expensive, at 7X earnings. Good dividend yield of 2.4%. Car sales in North America last year hit a real peak, and people are feeling that is going to come off, which is probably the case. However, this is a much more global company and more diversified. Global growth in the car industry is probably going to be about 3.3% next year, so this company can participate in that. Have good leverage to the European car industry and also to the emerging-market side. Great balance sheet, so they can take on some leverage and increase ROE that way, buy back shares and increase dividends.

Sold his holdings. Was getting a little concerned in the 4^th quarter last year that auto sales had peaked and OEMs were going to be snapping back at some of the auto parts manufacturers to try to get some price concessions, and in a rising rate environment it could put a bit of pressure on auto sales. Some of those things have come to fruition, however the precipitous decline in these shares represents a good buying opportunity. He is looking to re-enter the stock. Great balance sheet and a very attractive valuation, trading at about 3.5X EBITDA, which is near the low end of the range.

Is it possible to Pair Trade Magna (MG-T) and Linamar (LNR-T), and how would you do it? Yes, you could absolutely do it. You have the market risk, industry specific risk and finally the company specific risk. You are certainly going to take out most of the market risk, and the industry specific risk is close enough, and then you are left with one or the other of the companies. It really comes down to understanding the difference between the company specific factors.

(A Top Pick May 14/15. Down 31.18%.) Even though there has been a significant drop in the share price, he doesn’t have a Sell signal from analysts decreasing their earnings estimates. Trading at around 7X earnings and has a very low debt to equity. Still a Buy.

The chart shows no place to hang your hat on. There is a downtrend from November. It broke that at around $58 and then continued down to the $45 range. What you want to see is backfilling up to the $58 level. If we don’t see it holding in at $44, there is probably going to be some more downside pressure.

It is going to $35. QE has only moved up the demand for cars, but the market sees through it. LNR-T will have the same pressure down. It will be a great trade 3-5 years out.

Probably the best auto parts company globally. At some point he is going to want to own auto parts stocks. This company has had a great run and is probably getting to the point where auto production may start to roll over and come down a bit. Thinks the stock is starting to foretell that. One day you will want to own it, but you don’t have to own it here.

(A Top Pick Dec 10/14. Down 20.8%.) Fundamentally the company is doing really well. 3^rd biggest auto parts Company globally and the largest in North America. Trading at a crazy 7X PE, and under 4X EBITDA. 2.6% dividend yield. Super cheap. Thinks this will be up 50% in the next year.