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

Europe has been weak in auto parts because of VW. MG-T made comments that it should not have significant impact on their business. He would hold off stepping in until we see stabilization.

(Top Pick Oct 20/14, Up 18.26%) The whole VW business to the extent it has caused contagion is ridiculous. It is just a matter of a fine and it will be years from now. It is an opportunity here.

A lot of revenue is from Volkswagen in Europe. He would be more concerned if their US Volkswagen sales, which are manufactured in Europe, are affected. Diesel penetration in Europe is higher also. This stock should not be sold on the Volkswagen news. They are slowly re-leveraging their balance sheet, as they have very, very low debt.

A great company. Have great content relationships with all sorts of OEMs. One of the global leaders, and whenever a manufacturer wants to look at building a vehicle, this company is one of the very 1^st people they would go to. Not expensive. Trading below its market multiple of about 14.5X this year’s earnings. He is worried that the auto cycle might be closer to a top then to a bottom.

Volkswagen gets parts from MG-T. He has not been in it for some time because of the run it had. He is concerned about demand for vehicles with the maturity of the credit cycle. It is a strong, well executing player in the sector. He prefers MRE-T.

The auto cycle is in the 5^th-6^th inning. We had a very big downturn in ‘08-09 and so we are going to have this extended up auto cycle in North America. MG-T is just minting free cash flow. A very conservative balance sheet. It is a cheap company. They increase the dividend every year and buy back stocks.

This company is able to transform itself and move to higher margin ground and still trade at a very reasonable 9X forward earnings. Sold their interiors business and acquired German’s largest transmission manufacturer, focusing mainly on manual and dual clutch transmissions, which gives better fuel consumption and emissions. Have been very aggressive in buying back shares. Dividend yield of 1.76%.

In China you buy a car with cash, so sentiment swings are larger. North America and Europe will not be able to offset a reduction in car sales in China. He thinks car sales will stay strong for another 2 years. He owns LNR-T.

We still have this really long tail of the average age of a car in North America. This means you have 2-3 more years of pretty good growth in car sales. The stocks are quasi cyclical, so they look relatively cheap. Be careful because they shouldn’t get 20X earnings, which they don’t.

It is one of his top thirty names. The PE is under 10 times. There was negative press about trade agreements that put some pressure on MG-T and LNR-T, but they are a high quality company with low debt. It is one of the best companies he can find out there.

It is on her watch list. It has pulled back. She prefers this over LNR-T. They are both building up their presence in China. Of the two this is her preference. If they can improve their European margins that would be the upside. They are on track to slowly do that. She would potentially add that.

(A Top Pick July 7/15. Down 11.77%.) There is not a specific reason for this stock to be down. It is still one of his larger holdings. The valuation is still excellent. ROE of about 21%.

The whole auto sector is on wheels. Sales in the US are continuing and Europe is in sort of a recovery mode. He doesn’t see this auto cycle dying anytime soon. This company always seems to be somewhat expensive. This is a good time to buy it.

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. This company pretty much sells auto parts across the board to every single auto company. The knock against the company was that it didn’t have enough exposure to Asia, so it made an acquisition and the stock got hit with the drop of Asian stock markets. Very undervalued here. Fundamentals are quite cheap. Creating a lot of free cash flow. He is very bullish over the next 4 or 5 years for the car market and thinks this company is the best place to be.

He has been lightening up in the sector. The information he is getting is that while sales are good at the car companies, the cars distributed out to the dealers are sitting on the lots