MG, LNR orMRE or Neither for Auto turnaround??

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Asked on November 14, 2024 3:05 pm
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I'd expect the auto industry to have a pretty rough couple next few years here, especially after the Republican win and the risk of auto tariffs. I do know that Magna was impacted during Trump's first round of tariffs but I also know it wasn't by all that much. However, if larger Tariffs come in, we could see a hit to all these companies.

For an industry turnaround, would be hard to not lean towards a company like Magna. It is a strong free cash flow generator and has been buying back a ton of shares over the last decade here, which ultimately could work out in its favor in the event of a turnaround in the industry.

The two companies (Linamar and Magna) are so similar in operating performance (margins, earnings growth, fcf growth etc) that I would tend to lean towards the industry leader and larger player who is going to likely have a bit more tailwinds in the event of a turnaround.

All I will say is if you're looking to buy these companies based on a turnaround in the industry, I'd be thinking multiple years out. Don't expect any sort of quick turnaround.

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Posted by Dan Kent
Answered on November 16, 2024 1:10 pm