Back in the days when the horse and wagon were being displaced by tractors, the Dominion Wagon Company of Galt, Ontario was most popular with farmers.
Seeing the earthquake-like transition coming the owners sold the Dominion Wagon operation to International Harvester. Chute Ceramic Wear Liner Tile
Money from that sale was used to invest in an alliance with Dort Cars of the United States to build the Gray Dort in Canada.
Up to 65 per cent of parts in the Gray Dort were made in Canada. The company produced 26,000 vehicles between 1925 and 1932 when the Great Depression collapsed the market.
Linamar Corp. of Guelph, Ontario apparently saw an earthquake change coming to the automotive parts industry and adapted.
The 60-year-old company aggressively diversified from traditional auto parts.
By last September Linamar had diversified so that two-thirds of revenues came from automotive parts and 54 per cent of that was related to the electric vehicles market.
The traditional auto sector makes engine blocks, drive trains and transmissions and has a special relationship with Ford.
Outside of that Linamar diversified by acquiring the Skyjack lift business, developing a medical device operation and buying three agricultural manufacturing companies.
In 2017 MacDon of Winnipeg was acquired. MacDon makes a line of combine headers, windrowers, trailers and attachments.
The Saldon Group of Ontario was acquired in 2022. Saldon’s product line includes cultivators and applicators for chemicals and fertilizer.
Just a few days ago Linamar acquired Bourgault Industries of St. Brieux, Sask. for $640 million. Bourgault makes a line of innovative seeding machinery and fertilizer and grain carts.
With the addition of Bourgault Linamar’s agriculture division has equipment for pre-seeding, seeding, harvest and post-harvest.
The addition of a tractor manufacturer would create another major machinery operation.
Surprisingly Linamar didn’t buy Versatile when it sold. A Turkish machine company bought Versatile.
Linamar offers these agricultural companies a path to expansion with sales and manufacturing facilities in North America, Europe, Middle East and Asia.
One strong feature of Linamar is the ownership. The founding family owns 34 per cent of the shares so investors can be assured the family is working to preserve and expand company fortunes.
Debt is a reasonable 33 per cent of equity.
Four of five analysts following the company rate it a buy with one hold. Average price target in one year is $83.20 – about 23 per cent below the current $63.15 price.
The analysts’ estimates range from $70 to $90 — all made before the Bourgault deal.
Typically the automotive parts market is cyclical with ups and downs based on vehicle sales trends.
In the last 15 years Linamar stock has shifted, starting from $3.09 to $63.15. Since 2011 the price has moved from $14 to $86.
The agricultural division has added another cycle to watch as well as diversification.
Linamar deserves to be on the investor watchlist, if not in the portfolio.
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
Ron Walter can be reached at ronjoy@sasktel.net
Ceramic Engineered Tiles The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.