July 21, 2016

Based on my last email, I realized that it is currently an incredible opportunity to buy shares of Linamar (LNR).

Here are their numbers from Morningstar:

  • P/E = 7.8 
  • P/BV = 1.5
  • P/E * P/BV = 11.7

Holy smokes is this a bargain. Not only by Buffet’s metric of being under 22.5, but also by its 5-year averages:

P/E = 13 (40% discount)
P/BV = 1.9 (21% discount)

So what makes Linamar a great company? Well other than its excellent financials (dividend growth isn’t substantial but it is consistent, plus it’s a growth company anyways), here are Linamar’s highlights:

  • primarily makes powertrain solutions for many types of vehicles, from cars to industrial all over the world (13 countries & probably sells to others too)
  • secondary business is Skyjack which is a global leader in aerial work platforms; this is a good support business for when the auto industry declines
  • they have a ONE HUNDRED YEAR business plan… wow :O
  • the CEO is the daughter of the Hungarian founder of 1966 (who is now chairman of the board); they clearly care about the success of the business
  • Just seems like a very progressive & strategic company all-around (7 R&D facilities looking into fields such as agricultural and medical, and already have solutions for electric vehicles); they’re eager to adapt to the changing world

Our vehicles may not look the same in 5, 10, 20 years, but they will still need a powertrain regardless. I do hope to own it in the near future, but haven’t decided for sure.



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