Q: I have held Linamar shares for a number of years but am becoming somewhat frustrated by their performance. Shares trade at about the same price that they traded at in Oct 2020. Apparently investors just do not seem interested in the company. The recent quarter results seemed reasonable but the shares immediately went down $3. So, in today's market what would be your rationale for continuing to hold the shares, or is it time to sell and move elsewhere?
5i Research Answer:
LNR is a smallish, cyclical company, and has gone through a cyclical downturn, partially due to high interest rates and aversion to the sector (and aversion to small/mid caps). But much of this is now changing. Rates are headed lower, and small caps are coming back in vogue (somewhat). Recent earnings did beat estimates. The balance sheet is 'OK', and the company stayed highly profitable throughout the downturn. EPS growth is now expected, but the main attraction is its very low valuation (6X earnings). It has also continued to lower its share count over the years. In a recovery, from its current valuation, it 'could' do very well under the right conditions and with a sentiment improvement.