Martinrea (MRE.TO)

We are coming up to the proxy fight date of June 19, and he thinks they will get their slate of directors elected. Fundamentals are getting better. There is a lot of growth. Because of this non-fundamental stuff, the stock has lagged its competition. Thinks there is a real chance for $14-$15 by the end of the year.

Had some issues in the past. If you want to get involved in this sector, he would be much more comfortable in something like Magna (MG-T) or Linamar (LNR-T) which are firing on all cylinders. Car sales in the US in 2013 were some of the best on record. You want to buy companies that are showing activity with good stock movements.

Stock vs. Stock: AD or MRE? MRE is a manufacturer. He has not invested in the auto parts industry. It is a volume-driven business. Regarding the controversy, where there is smoke there is fire.

Law suit is getting cleaned up. It had a good run and he would like to see it pull back. This and MG-T are the two great participants in this area. Keep it on your radar screen. He likes the sector.

Does not rank well in his process because he is looking for earnings growth. Looking at the sector you would think it would be doing better. Thinks it will get back to $13 over time. Their business has not changed based on allegations against management. He replaced it with LNR-T.

Back in September, one of the senior executives made allegations so the stock dropped quite a bit. Company decided to hire a forensic accounting firm to investigate and there was nothing deemed material. Stock has gone up over 20% in the last couple of days. CEO is stepping down.

They had some irregularities a number of months ago and now the auditors have approved their statements and there is no problem now. It is now back to a level where people were buying and will want to get their money back, but now it has turned around. Accumulate on weakness.

A bit of a controversial name. Have been some issues which is why the stock has taken a beating. Most of the auto stocks have done really well over the last year. This one has done poorly because of an internal fight. Had always thought it was a pretty good company looking at their acquisitions. Pretty astute in growing their business and this whole development is a bit unfortunate. If the allegations brought by the one board member prove to be false, the stock would be a table pounding Buy.

This has an overhang of a lawsuit from the Vice Chairman. Compared to Magna (MG-T), this is statistically the cheapest by a long shot. The resolution and reporting of the lawsuit is coming in about one month’s time, so there is a little bit of downside risk. Once we get through that, the stock probably should be trading at $12-$13.

This should be doing very well given the resurgence in auto sales. Trades at 7X earnings versus 12X for Magna (MG-T) but it has this really ugly fight going on among some of the owners, board members and management and this has put a damper on the party. Doesn’t think it will end badly, but it might. He’s not in it at the moment, but it does look cheap to him.

(Top Pick Jan 28/13, Up 7.85%) Law suit over hanging, plus cost overruns. He sold it because the valuation multiple expanded. He is monitoring it and if it gets beaten up enough he may go back in.

Auto-parts sector has done really, really well. This company has not participated since last April. Part of the reason is because it has some product issues but most of the reason is some corporate governance type issues and former officers suing each other. It was probably overdone on the downside but he can’t judge it so he is happy to stay away.

Not a value investor, but when he saw how badly beaten up it was getting, he started looking at it very seriously. However, the allegations that are being made are very, very serious, so he is not Buying until he sees if another shoe is going to drop.

(Market Call Minute.) With this lawsuit, you just don’t know. If you don’t know, you don’t play.

Would not be surprised if it went back up, but take advantage of any strength and sell.