Martinrea (MRE.TO)

(Market Call Minute.) Doesn’t own this at the moment because of the legal risks, but auto volumes continue to do well. Have been beaten up big time because of a lawsuit coming against them.

Just added to his holdings in the past couple of months. Have been a lot of negative headlines with the former chairman. Company hasn’t been well run over the past couple of years. Had some issues with new contracts and these have re-occurred recently. This is a Canadian manufacturer who is going to benefit from a weak Cdn$ versus a strong US$ and they have a lot of US$ revenue. A decent auto-parts company. In terms of their peers, they trade almost double in terms of valuation. In one or 2 years, they will either clean up their act or get sold. If sold, it will be for a lot more than their 3.5X EBITDA value that it is priced at today.

Bought just before Christmas on bad news about the law suit. The fundamentals are still good. He likes the auto industry and they announced new contracts since the lawsuit. 6 times earnings, vs. 12 for Magna. 40% possible return but there is some risk to it.

The stock is relatively cheap so unless there is something much more severe with this company, this would be the best buy of all.

Has not been participating recently in the auto industry growth. There are law suits in overhanging them. Operationally it is still doing okay.

In an area he likes. He would normally say to stay away because of the legal disputes but in this case, the stock is down. Earnings are protected to grow. Take a speculative position and increase later perhaps.

New 52 week low. Let it put a bottom in place. Be a bit cautious. Market is telling you there is something a bit wrong. It is a balance sheet question. You need to see it hold the support and rally a little bit.

Doesn’t feel that he needs to chase bad stories. This one does not fit his criteria yet. His metric of comparing to Magna (MG-T) is “enterprise value to EBITDA” and the 2 companies are quite close. Probably good value here and if it gets lower, he is sure it could be subject to acquisition because it has some great customers.

Where there is smoke there is fire. He would be more likely to sell than to buy because you don’t know the extent of it. If there is an accounting issue, then stay away from it. Does not know the strategy to get back in if you sell.

(Market Call Minute) Stay away from lawsuits.

A previous director has come forward with a number of charges about money being skimmed from the company, etc. Stock starting to recover, but then more charges came over. Wait until the dust settles.

(Market Call Minute.) Accusations of misdeeds flying back and forth through the boardroom. You don’t want to be there.

A good company. All the parts manufacturers are doing well. A huge upside in demand underway. There is a shareholder lawsuit and that is the overhang. You could look at LNR-T.

Used to own it. Likes management and liked what they were doing. Tangible book value is about $5.75. he has no intention of going back in until everything about the law suit is settled. Prefers SUP-N. He is finding a lot of value in US micro-cap.

The big overhang is the law suits. There could be more drops to come in the price. The customers have not canceled any orders but that is a risk. It is dirt cheap. You are being compensated for the risks if you buy it.