Magna International Inc

Ticker: MGA, Buy below $50.

Why I Would Buy

1.     Cheap – Magna trades at 8x current earnings and an astounding 5x forward earnings!

2.      Investment grade credit rating – Magna’s long term senior debt was already investment grade, it was recently upgraded another notch by Moody’s (from Baa1 to A3).

3.      Upbeat Analyst Consensus–5 star “strong buy” rated by S&P,  9.7  equity consensus score by Reuters’ (at Fidelity) .

4.      Low Debt – Just 25% of the capital structure is comprised of debt.

5.      Low Payout Ratio – Magna pays out less than 20% of its earnings as dividends.

 What Could Go Wrong

1.       Trump and NAFTA – About 60% sales of Magna’s sales is spread across Canada, US and Mexico, enough said!

2.      Highly Cyclical –  The automotive industry is highly cyclical, Magna is probably riding the crest of an industry peak right now ( the company lost money during 2009 recession).

3.      Meagre Returns of Equity – RoE is my favorite metric for picking stocks, Magna has earned anemic single digit returns on this metric.

Disclosure: I am long MGA, please read additional disclosures here before taking any action based on this post.