09 Nov ADD: LINAMAR CORPOATION (LNR.TO)
NOVEMBER 9, 2018, BUY 3000 SHARES OF LNR @ CAD$49.85
Today I bought 3000 shares of LNR on the TSX. Earnings came out yesterday and as expected, there was margin compression in the important auto parts business (over 50% of the overall business). However, revenues conitnue to increase and sales prospects continue to be strong. The Transportation Division (ie, auto parts business) tends to have lower margins on new programs they are developing with their various clients (GM, Ford, VW, etc.) and higher margins on established programs. The division aims for 8.5% on revenues, however, due to business mix this quarter and due to slower sales in Europe, margins slipped into the 7% range this past quarter. Still, revenues will continue to ramp next year and likely into the 2022 period on new programs already sold. LNR’s Skyjack business and new MacDon business performed well and are businesses, which if valued on a stand alone basis, are worth $40 per share.
I now have about $250,000 invested in LNR or about 27.5% of the portfolio. Despite the poor performance of the share price, LNR will provide cash earnings of $30,000 – this is $30,000 which the company will earn after capital ivestments. It’s a good cash flow return on the current share price. Management is dialed in and I believe the market will one day see the value in this thing, and we’ll see some positive share price movement.