Martinrea (MRE.TO)

You don’t want to get in front of a lawsuit related situation. It’s an ugly bun fight right now but looking at what the company is doing; have growth in Europe, an improvement in the European operations and increasing penetration there, operations in the US, the platforms with Ford Escape and Fusion and others, as well as the valuation of the stock of 7-8 times earnings, 3 to 4 times operating cash flow. Yield of 1.38%.

His model prices $16.83. This gives you a potential upside of 95%. However, there is litigation surrounding the whole thing. Thinks it is worth something in your portfolio if you want to establish a position in it.

Every time bad things happen to profitable companies, he takes a look at them because he always feels the market over reacts. At the end of the day, this is a going concern, which is generating a lot of free cash flow and is in the right space. He is looking at this one very hard.

(A Top Pick Dec 17/12. Up 11.17%.) There has been a lawsuit between the company and a former chairman. A lot of shares sold off in the last 2 days. He is watching this. At these prices, the stock is incredibly cheap. Still a Buy.

With the suit that is going on, he doesn’t know enough to make a decision. If you own, subject to your feelings for oil, as well as your tax loss position coming into the year end, he would be inclined to Sell. He prefers Magna (MG-T).

Would prefer Linamar (LNR-T) over this or Magna (MG-T). This one has lagged Magna badly. Magna is trading at about 12X earnings and this one is trading at about 8.5X, almost 50% less. The reason for this is that there is an overhang with a lawsuit.

Company came out with a press release a while ago, saying they were going to defend themselves against the lawsuit from the former Vice Chairman. Stock fell when the initial claim came out and apparently everybody is scared of a repeat of this. That is where the stock corrected downwards. However, it corrected back to around the 2012 high and bounced off this. This is probably going to be the base point. It’s going to be a long time before any news really comes out. Doesn’t see a lot of risk. Not a bad place to be, but it might be a slow consolidation before it starts to go up.

Could see this stock at $15 in 12 months. Really likes the earnings growth. Ford (F-N) came out with good numbers today and this company supplies for the Ford Fusion and Ford Escape and numbers have been quite strong on both of these. Multiple is fairly low and feels that larger cap managers are moving down into the space to try and get that growth.

(A Top Pick Aug 17/12. Up 37.42%.) Stock got whacked on the lawsuit by a former director, which is always scary. They continue to gain traction in Europe. He is still Buying.

The rumours floating around makes him want to shy away but the reality is that the shares had a good run. He doesn’t see enough value in this to step into what could be a serious problem.

Auto-parts. Great company. The issue now is the legal overhang so he would be a little cautious. Often when there is smoke, there is fire.

Has liked this stock for a while, mainly because it is in a sector that he likes, cyclicals. Chart shows a long period of consolidation during 2010, 2011 and 2012 following the 2009 advance. It broke out early 2013 with a little bit of a pull back in the last little while. This was based on a lawsuit, a one-time event, and he would think the stock would advance from here.

(A Top Pick June 5/13. Up 8.35%.) Vice Chair left the company 15 months ago, sold all his stock and got severance. Now trying to retake control. Company has been aware of his allegations and there could be one executive that is at fault, but in terms of a major disruptive event that would affect earnings power, he doesn’t see it happening. Trades at about a 25% discount to other auto stocks and growing just as well, if not better. He is still Buying. $10 is an excellent buying opportunity.

Part of the automotive cycle, which is very strong right now, running at around 16 million units. Price performance has reflected the strong cycle. The best time to add to the automotive stocks is during a recession. They are highly, cyclical businesses. We are in the late stage of a car cycle.

Probably over the long-term on a Buy and Hold, you’ll probably make more money on this then you would with Magna (MG-T) but this will be significantly more volatile. Both excellent companies. Magna is probably the gold standard and this one is the “up-and-coming” junior upstart that has a lot of potential but has more risk. If you don’t own, Buy a partial position and add on weakness.