Linamar

Linamar (TSE: LNR) is a Canadian auto parts designer and manufacturer whose primary customers include GM, Chrysler and Ford. Before you rush to the exits because of their exposure to the North American auto industry, consider the following. Often, cyclical downturns beat a stock down far more than is deserved. We've seen it over the years with home builders, as discussed here, and we've discussed here how cyclical downturns offer opportunities for value investors to buy companies while they're cheap.

Many will argue that this is in fact a secular downturn for a company like Linamar. However, Linamar is showing some signs of being able to emerge from this storm as strong as ever. The company's focus on alternative energy technologies has led to market share gains, with Linamar's North American content per vehicle rising from $94 last year to $105 this year. Although Scotia Capital analyst David Tyerman is bearish on the industry, he sees a bright spot with Linamar: "Linamar remains our favourite, given its exposure to new technologies."

The company also recently acquired a plant in Mexico to help keep costs down. They have also been increasing sales into Asia, and continue to make market share gains in Europe. As a result, sales, margins and earnings were actually up this quarter, both year-over-year as well as incrementally, despite a weak North American economy.

Nevertheless, its stock price has been brought down along with its sector peers, leaving it with a P/E of 7.5 and a price to book value of less than 1. This has prompted its chairman, Frank Hasenfratz, to acquire shares on the open market, stating in a press release that he believes they are undervalued.

No one knows how long this downturn in the US will last, but Linamar is showing signs that it can do just fine navigating through it.

Disclosure: Author has no position in Linamar