How Should You Play Magna International Inc.?

Is now the right time to buy Magna International Inc. (TSX:MG)(NYSE:MGA)? Do shareholders sell or hold on to the stock? Find out here.

| More on:
The Motley Fool

The auto sector had a great summer and many analysts and experts are now wondering whether the sector is running out of steam. Four months ago, I asked which company was a better buy — Magna International Inc. (TSX: MG)(NYSE: MGA) or Martinrea International Inc. (TSX: MRE).

That was back when the stock was trading $10 higher than it is today. The company is undoubtedly a quality buy, but should investors be worried about its recent sluggish performance? Or should they instead take advantage of lower valuations and get in?

Magna is a world-class company that develops, manufactures, engineers, supplies, and sells automotive products. It operates throughout North America, Europe, and Asia. It has 315 manufacturing operations and 82 product development, engineering, and sales centers in 29 countries (and counting), which makes it one of North America’s largest auto parts manufacturers — if not the largest.

Just a few days ago, the company signed a deal to buy auto parts maker Techform Group of Companies. And although the terms of the deal were not released as it is expected to close next month, the latter company has a whole host of factories in Canada and around the world and the deal would add to Magna’s expansion plans. Techform is a company that makes hinges, door-locking rods, and other auto parts.

Additionally, Magna announced it will open two more facilities in India as it continues its expansion plans and goals to take over the world, one automotive spare part at a time (OK, maybe that’s a tad dramatic). But you get my point. The company continues to show strong growth primarily via acquisitions and steady earnings. Most analysts have a “buy” rating on the stock, while a few have a “hold” and almost none have a “sell.”

But coming back to the questions I raised at the start: How do you play this stock given current market conditions? Well, if you already own the stock, I say hold on to it — it’s a quality purchase and a company like Magna is always valuable.

If you don’t own the stock yet but are interested and aren’t sure about the best time to buy, I suggest taking a step back and waiting to see how the stock plays out during the month. October is generally known to be one of the worst months in terms of volatility, often witnessing some of the year’s sharpest falls as well as highest gains. And if we are to go by yesterday’s market performance, we’re definitely in for a lot more downside, which is a great time for investors to get in. So take your time and pace yourself. You may just end up with one of the best bargains of the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Sandra Mergulhão has no position in any stocks mentioned. Magna International is a Stock Advisor Canada recommendation.

More on Investing

A close up image of Canadian $20 Dollar bills
Dividend Stocks

This High-Yield Dividend Stock Is a Monster Passive-Income Machine 

This top TSX dividend-growth stock offers a 7.4% yield.

Read more »

path road success business
Bank Stocks

Scotiabank Is Down 0.9% After Earnings: What Investors Need to Know

Bank of Nova Scotia (TSX:BNS) released earnings yesterday. Here's what you need to know.

Read more »

Hourglass projecting a dollar sign as shadow
Dividend Stocks

For a Shot at $5,000/Year in Passive Income, Buy 6,850 Shares of This TSX Stock

Whitecap Resources is a monthly dividend stock that offers you a tasty dividend yield while trading at a cheap valuation.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, May 29

Besides more Canadian corporate earnings, volatile commodity prices could give further direction to the TSX benchmark today.

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Investing

3 Soaring Stocks to Hold for the Next 20 Years

These three stocks are good bets for the long haul, given their healthy long-term growth prospects.

Read more »

grow dividends
Tech Stocks

Celestica Stock Is up 44% Since Earnings: What Investors Need to Know

Celestica continues to benefit from strong demand and production efficiencies, yet the stock remains undervalued.

Read more »

A plant grows from coins.
Investing

2 Dividend Stocks Paying 5% or More That Could Beat the Market in 2024 and Beyond 

Here are two top dividend stocks long-term investors may certainly want to consider for their yields and growth profiles right…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

Love Value Stocks? 2 That Are Screaming Buys in May 2024

Patience can pay off by investing in these two value stocks with nice dividends and the potential to turn around.

Read more »