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

For some reason the stock has been very weak for the last 4 months. Had a bad quarter because of a strong US$, some inventory restocking and other issues, which he views as a very temporary. The auto cycle has not peaked yet and has another 2 years to run. Dividend yield of 1.96%.

Owns a little, but is thinking of getting rid of it. It has underperformed. The Volkswagen scandal was atrocious, and they supply them. All of the car manufacturers are really kind of in the 9^th inning. If you are a parts manufacturer, you are a couple of innings behind. He doesn’t see a lot of reason for huge optimism on this name.

Auto business was a big part of the US growth story for a number of years. Dealer lots are being crowded with cars. While earnings of the big automakers are showing very strong, you are not seeing that translated into sales at the dealership. There may be a gap going forward.

The auto industry has done extremely well. We are up to selling 16 million units in North America per year, which has been very good for the auto companies. As a result, their stocks have done tremendously well. The price of the stocks was anticipating that the growth was going to continue for some period of time, but realization is that things are now levelling out and prices are readjusting to some extent. Doesn’t think there is a lot of downside, unless we were to go into another recession and see a drastic drop in the number of cars and light trucks sold. This is trading within reasonable levels now.

They report in US dollars. They had the largest drop in earnings in four years and it had a lot to do with currency. But this is an accounting issue. It is Canadian and we buy it in Canadian dollars. The currency has no fundamental effect on the company stock. They have other issues that will be addressed. He thinks you should add to the position. The auto cycle will probably last a lot longer than you think. He also owns LNR-T.

Has had the largest drop in 4 years, a lot of it currency related. Since Frank Stronach left, the company it has done exceptionally well. The car industry has gone blockbusters on sales. Feels the stock is at the top end of its range and he would look for a bigger pullback before buying the company. They have a great opportunity to become a bigger and bigger player. There is also some room for them to make some acquisitions.

This cycle will not go on forever. Magna thinks that there is more left to go and he agrees. Got hurt today by currency and margins, basically due to their far eastern operations, a very small part of their operations. Thinks the selloff today was overdone, but he wants to look at this closer. Feels there is a better buying opportunity coming up.

He has owned it for a while now. The VW issue made it a great buying opportunity. The demand lost by VW will be absorbed by another manufacturer that MG-T is probably already selling to anyway. With low commodity prices, this helps their profit margin.

EBV +3 is bedrock for this company. This company is cyclical. He made his money a long time ago off this one. It can only go to $81, but that’s it. There is risk that if the US does fall into recession this one will fall off.

He likes all the auto parts companies. The age of US cars on the road is 10-12 years. It has been coming down, but there is still a ways to go.

(Top Pick Sep 18/14, Up 10.62%) He does not know the impact of VW, but thinks it will be immaterial. The car fleet around the globe is still very old. The multiple is cheap.

Seasonal strength is from March to July. In the back half of the year it does not tend to do as well. It is not looking good from a seasonal point of view. Technically, it is bumping up on the 50 day moving average. We want to see it break above. If you did not get it on the recent low, then wait for the break out so there will be clear skies ahead.

(Top Pick Jul 31/14, Up 10.44%) The concern right now is the VW impact, but they have limited exposure to diesel. He sees 15% free cash flow, 15% dividend growth, higher margins, buybacks, organic grown and acquisitions.

Magna’s financial position is great and current conditions do not affect their preferreds. They have a lot of exposure to VW so he would avoid their common stock.

It is an incredible story. They continue to execute very well. If you can buy it on a pullback over the next few months then you should.