September Is Coming!

Aug 10th, 2009 – Comment

Norm from London, Ontario writes about Linamar: What is your assessment of Linamar. I was at their annual meeting and was quite impressed. Is it still a good investment for the future? I really enjoy you on CFPL AM980 Hi Norm, Linamar  Corporation (LNR TSX) has recovered very nicely from the March lows when it traded […]


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linamarNorm from London, Ontario writes about Linamar:

What is your assessment of Linamar. I was at their annual meeting and was quite impressed. Is it still a good investment for the future?

I really enjoy you on CFPL AM980

Hi Norm,

Linamar  Corporation (LNR TSX) has recovered very nicely from the March lows when it traded down to $2.oo which you have to like. The major driver on the recovery in the stock price is the anticipation of a consolidation in the auto parts business.

The reduced demand for motor vehicles has the assemblers looking to do business with healthy suppliers who won’t create more problems for them by closing their doors and messing up the just in time inventory process that has parts arriving at the plant at the right moment.

Another factor in the auto parts sector is that the U.S. Government has said that it is not considering any new federal aid unless there is a threat to auto production. That puts pressure on companies that don’t have healthy balance sheets.

LNR is seen as one of the companies that has the resources to survive and thrive through the economic crisis.

lnr

The three year chart shows the dramatic rise in the stock since March. The big surge in May was driven by better than expected results in Q1 but keep in mind we are talking less bad news not great news. Sales slowed and the company generated a loss in the period. LNR is scheduled to report Q2 on August 13.

The stock got through resistance at $12.50 and if it can maintain that level as support it meets another level of resistance at $15.00

lnr2

The three month chart shows the MACD in an uptrend which suggests a continuation of the advance.

Now before getting all giddy about the prospects lets keep in mind that we are approaching the month of September which can be an unkind month for investors.

In addition options traders are taking the side of a September sell off and money manager Mark Mobius is calling for a 30% drop in global stocks.

For my money I would ask myself if I expected a stock, that ran from $2 in March and closed on Friday at $13.05,  to have more gas in the tank in the short term.

Long term I do see LNR as a winner because of their opportunity to consolidate the weaker players in their sector. Its just a matter of finding the right entry point.

Happy Capitalism!

Categories: Automotive
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