04-27-2015, 11:22 AM
Finally started a position in MGA this morning with my spare cash at 80 shares. I figure I've spent enough time looking at it already.
It's worth noting that Morningstar hates it and thinks it's worth $38. They say that the car parts business has no moat, and is too competitive for anyone's profits to be safe since routine price decreases are expected from the auto companies. Any innovations and cost cuts MGA can make are just running to stand still. However M* is the only contrarian on this one. By any other yardstick they are undervalued. Warren Buffett is betting big on the auto industry by buying dealerships. I'll hold for at least a year for multiple expansion, and then reassess.
It's worth noting that Morningstar hates it and thinks it's worth $38. They say that the car parts business has no moat, and is too competitive for anyone's profits to be safe since routine price decreases are expected from the auto companies. Any innovations and cost cuts MGA can make are just running to stand still. However M* is the only contrarian on this one. By any other yardstick they are undervalued. Warren Buffett is betting big on the auto industry by buying dealerships. I'll hold for at least a year for multiple expansion, and then reassess.