MG, Magna update

The usual then , 12th May 2015, and now charts;

mg may 12 2015 smg feb 6 2016

Roughly a year ago we were toying with the idea that we were looking at a series of 4-5 at the top, indicating that the end was, at the very least, near. We advised that one should bail.

In retrospect we suspect, but still are not sure, that this may be a diagonal, almost always a 5th wave and therefore near the end. The difference is not entirely academic as the diagonal or wedge has a clear minimum target of $40 and we are not even there yet.

In any event, if you live in the Newmarket/Aurora area and are talking to your neighbour, you can tell him that you sold the stock at $68 following this blog and have saved 1/3 of your money since then. If he asks you if the blog is expensive, just tell him it is for free, at least for now.

Magna has had declining oil and a rising US$ going for it. It has more cash than debt and its payout ratio is below 20%. There is nothing not to like, even the HQ in Aurora look more like a replica of Versailles than your typical auto company factory box. But it is in a cyclical business. Ultimately we do expect it to go below $40, perhaps as far as $20.

And then there is that sure kiss of death;

A number of brokerages have recently commented on MG. TD Securities upgraded Magna International from a “hold” rating to a “buy” rating and dropped their target price for the stock from C$59.00 to C$57.00 in a report on Friday, November 6th. RBC Capital lifted their target price on Magna International from C$88.00 to C$91.00 and gave the stock an “outperform” rating in a report on Friday, January 15th.

Did they forget the silly mantra of the industry, “you cannot time the market”?