Stockchase InsightsMagna Int'l. (A)MG.TOBUY ON WEAKNESSFeb 14, 2022

He owns other industrials. Not looking at it going forward.

Does not own shares. Does not think growth is going to continue for company. Major clients are traditional auto companies (Ford etc.) that are not growing. Would not recommend buying. 

Don't buy based just on a nice dividend and low valuation. Lots to like, but stock's gone nowhere. Hard to figure out where the value is. He wants to own quality and the best, and this one doesn't make the cut.

Quality manufacturer. Well run. Generates really good ROC and free cashflow. Hangup right now is related to uncertainty on the economy. Potential NA recession not good for auto sales. Good name in the space.

Does not own shares. Volatile stock. Scores 8/10 fundamentally. Would hold of already own. Not a good time to invest otherwise. 

Is sensitive to the economy which he sees weakening. Cyclical. The consumer is stretched and the savings rate is declining. Yes, PEs are cheap, and MG supplied gas-engine as well as E-cars. He likes the auto companies, but now is not a great time for them.

Transition to electric has caused a bit of pain on retooling factories. Once the transition is complete, they can't go back and forth. Union negotiations will impact car prices. He'd prefer an actual automaker like Toyota.

A good company and major player in car parts. Shares have been volatile lately due to higher interest rates, labour costs, commodity prices and microchip prices. However, inflation is easing and so are supply chain bottlenecks. Good profits and balance sheet. Hold and enjoy the yield.

Since peaking in early 2021, MG has been in a downtrend. Now, it's forming a base. If it breaks $85 and stays there a few weeks, that's good.  But it keeps rubbing against that resistance level and he doesn't see a catalyst to take it higher.

Looks like it will go down to $68. Consumer spending is slowing down. You want to see a breakout above $81-82. Of the 10K stocks you can look at, there are better ones with better patterns. 

If there's a recession, car demand will decline. Also, inflation has been a headwind for these companies. They can't raise prices to absorb costs anymore; they're hitting a ceiling. These companies are cyclical, not defensive. Wait for this sector to bottom before stepping in.

MG reported EPS of $1.49 beating estimates of $1.18, and revenues of $14.34B beating estimates of $13.35B. Sales grew by 11% for the quarter, which was well above the global light vehicle production growth of 3%. Management raised its EBIT margin outlook to 4.7% to 5.1% from 4.1% to 5.1%. Its Adjusted EBIT declined for the quarter, from $507M to $437M. This year-over-year decline is largely a result of higher net production input costs, operating inefficiencies at a facility in Europe, and higher net engineering costs. We feel that these were strong results that beat estimates and included a guidance raise, but it did issue debt for the quarter and was cash flow negative. We continue to like the name but feel that it needs to see some of the near-term headwinds lifted before we become overly excited about its opportunity.
Unlock Premium - Try 5i Free

Underperformed TSX since 2021. Fairly cheap at 10x forward earnings. Concerned that 75% of revenue comes from top 5 customers. Raw material costs are volatile, which adds uncertainty. Move to EV is pressuring margins. Automakers have committed to lower production, which impacts revenues.

International operations. Top 3 supplier globally. Historically inexpensive multiple. Shares volatile recently. Higher interest rates, higher commodity prices, higher input and labour costs, supply chain issues. Remains cautious. 

Inflation waning, supply bottlenecks easing. Very good management. Long-term hold. Nice dividend above market yield.

They participate in assembling EVs, but will be hit by inflation in raw costs and wages. This will constrain them and profits.