We continue to believe there’s room for most investors to hold aggressive stocks, which typically are more leveraged (with more debt) and volatile than conservative stocks.
Still, to cut your risk, you should limit aggressive stocks to no more than 20% of your total portfolio. We also zero in on companies that are leaders in their niche markets and have hidden assets such as this one.
Recent acquisitions to capitalize on rising demand for EV parts and agricultural equipment have driven this firm’s revenues 18.7% higher in the most recent quarter.
The company is making smart strategic moves while remaining cheap, as the stock trades at just 5.9 times the company’s earnings forecast.
LINAMAR CORP. (Toronto symbol LNR; www.linamar.com) makes a variety of automotive parts, including cylinder heads and cylinder blocks. It also makes self-propelled, scissor-type work platforms under the Skyjack brand, as well as agricultural harvesting equipment.
The company continues to adjust as carmakers shift away from gasoline-powered vehicles to EVs.
[ofie_ad]
To that end, Linamar completed several acquisitions in 2023. Those include $318.9 million for three plants, one in Alabama and two in Eastern Europe (Czechia and North Macedonia), from Dura-Shiloh. All three facilities produce battery enclosures and trays for electric vehicles (EVs).
Linamar also paid $64.0 million U.S. for the U.S.-based manufacturing operations of Mobex Fourth and 1, LLC. Those businesses make various components for gasoline-powered cars and EVs. As well, it acquired Bourgault Industries Ltd. of St. Brieux, Saskatchewan for $640 million. That firm makes a variety of agricultural products, including equipment for ploughing and seeding.
Value Stocks: Further EV-related move positions Linamar for the future
In a further response to automaker plans to increase production of electric vehicles (EVs), Linamar is building a new plant in Welland, Ontario, that will make diecast aluminum structural components for EVs. These parts weigh less and do not require the complex welding and processing associated with traditional components. The company has not yet said how much it’s spending on this plant, but it should begin operating in February 2025.
The company’s revenue in the three months ended June 30, 2024, rose 11.6%, to $2.85 billion from $2.55 billion a year earlier. That’s mainly due to recent acquisitions and new contracts. Sales of automotive equipment (69% of the total) improved 10.5%, while sales of industrial products (31%) gained 14.1%. Earnings before unusual items also rose 17.2%, to $3.06 from $2.61.
The shares currently yield a reasonable 1.6% while trading at just 5.9 times the company’s forecast earnings. That makes this firm a compelling buy as the market gradually realizes the value of its recent transactions in the EV space.
Recommendation in The Successful Investor: Linamar Corp. is a buy.
