Q: I have held MG in a non reg account and watched it drop and drop. I recently did a tax loss sale and exchanged for LNR, which has somehow rebounded almost 50% in a few months. However…the Canadian car parts sector is as volatile as ever. Is it worth exiting the sector? Any crystal ball suggestions at this time as to what I should do? I am inclined to exit the sector for brighter skies in a less volatile sector.
Even if they keep some business with margins, ie US factories, there is so much risk of sunk costs in process.
Even if they keep some business with margins, ie US factories, there is so much risk of sunk costs in process.
5i Research Answer:
It's a tough call, but with valuations very low and sentiment maybe at a bottom, there is potential for the sector going forward. Lower interest rates and the end of tariff uncertainty could be a catalyst. MG is 25% off its lows, and LNR is now up 21% for the year. Both offer decent dividends as well. There are fasting growing sectors, but these are going to be more expensive and likely more volatile (i.e. tech). We would be OK at this time holding a small position in the sector and see how it reacts to lower rates going forward.