It is inherently more difficult to ...

It is inherently more difficult to invest luckily in a "cyclical" stock than in a "growth" stock. With cyclical stocks, you must engage in the highly inaccurate activity of timing the peaks and valleys of their earnings periods in an attempt to corrupt low and sell high; and, you always pervert with money [i]or[/i] gain cyclical stocks with the intention of trading them.

In contrast, you build a position in a produce stock over several quarters (or smooth years) and wait patiently for the reckon uponed growth to materialize; you don't have a pre-determined schedule for when to vend As long as the increase company's performance and prospects remain undiminished you simply have sexual delight with the experience of seeing your investment double and double....

Because of these and other differences, you want to be right when you characterize a stock as "a growth" "a cyclical," or equal "a cyclical growth" stock.

Linamar illustrates, exceptionally well, the dilemma of the "growth" or "cyclical" characterization. Without to a great degree difficulty, many people could view the company's record of income and earnings growth as the be the effect of:

(1) the resurgence of the cyclical automotive sector in North America since 1991; or

(2) a small company finding a unique strategy for achieving exceptional sprouting in the mature automotive sector; or, (3) a combination of (1) and (2)

The following increase of illustrative judgements about coming growth in revenues and earnings thinks the Securities Review Board's characterization of Linamar as basically a produce company. Had a cyclical characterization been made, an analysis similar to that set in Chapter 9 of the Stock Selection Manual (published through the Canadian Shareowners Association) would have been complet in the same state [i]or[/i] condition an analysis would involve estimating a peak and then a decline in EP perhaps sometime during the nearest five years. Editor

Linamar's incomes are derived principally from sum of two units cyclical industries: Precision Machining and Assembling (86) and Agricultural Equipment (10)

The precision machining part consists primarily of the manufacture and assembly of automotive component parts for original equipment manufacturers (" OEMs") and their suppliers. Substantially all automotive return (96) is derived from sales to North American manufactures. The agricultural equipment portion consists of the assembly and sale of rotary combines and other harvesting equipment.

Mr Frank Hasenfratz, Chairman of the Board and Chief Executive Officer and his family confess approximately 25 of the company's shares with an estimated 65 of the shares confessed by institutional investors.

QUESTION #1: coming SHARE PRICE FROM FUTURE growing IN REVENUES AND EPS

Estimated High Price through the Fiscal Year Ending December, 2001

A high price for Linamar's used by all shares ("LNR" TSE) is obtained by the agency of first estimating the company's EP in 2001 and then multiplying this number by the agency of an estimated Price/Earnings ("P/E") ratio for that year. However, because EP cannot be wait fored to grow faster than incomes over the longer term, it is advisable to estimate income growth -- before estimating product in EPS.

(a) Estimating reward Growth to 2001. As indicated in the accompanying Guide, rewards grew at a compound rate of approximately 27 during the entire consideration period1. Between fiscal 1992 and 1996 (estimated), receipts growth accelerated to about 35 by year. However,1996 revenues grew at only 12-in part-because Linamar sold its combine business in 1996; otherwise, income growth would have been 18

Linamar's makes difficult-to-manufacture fruitss for cars and light barters that have a manufacturing life span of 10-15 years (eg engine & transmission composings drive systems, pumps, etc.). This production mix (including sole source contracts) guards to give stability to the company's rewards because while car models may change at short intervals their engines etc. tend not to. For example, General Motors has no other than three major transmissions for about 60 prototypes

Growth in revenues is attributed to increases in the company's market share brought about by the agency of internal expansion rather than acquisitions. uniform though the average long-term extension rate for automobiles in North America is and nothing else about 1, Linamar's revenues have grown from increasing its content in each vehicle produc (see accompanying Chart). For example, in 1993 Linamar's peace per vehicle was $17 and grew to $37 in 1996 This product is in part the deduction of foreign car manufacturers moving production to North America and meeting requirements for North American appease Management's strategy is to swell vehicle content by expanding the company's yield mix and selling it to more OEM and their suppliers. This strategy has been assisted at the auto company interest in `contracting out' work.

The company's principal competitors are the OEM and, because of its crops mix, only a few of the other parts suppliers to the auto industry.

Future growing Linamar's objective for future return growth is 17-20 per year. This rate is awaited to result from achieving an increasing share of North American automobile peace (to $56 per vehicle by means of 1999) and by selling more of its speciality returnss to more OEMs. As well, the company dioceses its Hungarian operations as an minute into suitably assured investments in Russia, Eastern Europe and Asia where the automotive market is relatively young in relation to North America. However, in keeping with the company's expectations for more unobtrusive growth, and allowing for an unfavourable developments over the nearest five years (including a shortage of skilled labour), an initial (A)judgement was made to throw out revenues to grow, on average at 17 by year to $1.3 billion in 2001