If I were to buy a single stock in the auto sector, it would no doubt be Magna. However, the company is really having some difficulties right now with not only margins but a decline in the automotive sector as well.
These companies are very cyclical. I've attached an image of Magna's stock price relative to the Bank of Canada overnight rate (policy rates). Although Magna isn't particularly prone to changes in policy rates, policy rates are largely determined by economic activity. When rates go up, borrowing goes down in an attempt to slow the economy. As such, cyclical companies like Magna that are heavily exposed to a sector that tends to do well (automotive) during strong economies, it's not surprising we see drawdowns in stock price when rates go up, and as rates decline, we see growth in the company's stock price.
If we are at the top of the rate cycle here, I could see some upside in Magna's price. But we will likely need rate declines and a turnaround in the general health of the consumer before activity ramps up.
