Tuesday Ticker: April 7, 2020

Toronto, Ontario — As investor optimism rises around the globe, some areas of the auto aftermarket appear to be surging faster than others.

Charging bulls

Optimistic investors have poured money into ailing stock markets after better-than-expected Coronavirus news.

On Monday, April 6, the rates of deaths caused by the Coronavirus dropped slightly in hotspot areas, including Italy and New York state. In response, major world indexes climbed an average of four percent.

Investors were most positive about the U.S. market, with the Dow Jones industrial average and the Standard and Poor 500 both rising by more than four-and-a-half percent by mid-morning. The TSX looks to be gaining ground at about the same pace.

While the U.K.’s top businesses, represented in the FTSE 100, saw gains, they were significantly smaller than in other parts of the world, at less than three percent.

Magnificat for Magna

The market’s optimism spread into Canadian auto aftermarket businesses. By the mid-morning of April 6, Magna International saw its stock price rise by eight-and-a-half percent.

In late January, the chorus of Te Deums from Magna International investors should have been a harbinger of problems for the broader economy. The stock saw its value slip due to the Coronavirus outbreak early due to its reliance on Chinese manufacturing facilities.

Investors are now left wondering if this sudden resurgence for the auto parts maker could also be a sign of things to come for the broader economy.

Magna previously teased investors with a small uptick in its stock value late in March. From March 13 to March 20, the stock rose by more than 10 percent. Most of those gains were wiped away over the course of the next week.

Another Ontario-based parts manufacturer, Martinrea International, saw gains higher than Magna on the morning of April 6. The stock tipped close to 10 percent above its April 3 close in less than two hours of trading.

Aftermarket ascendence

While the auto parts sector may be rising faster than the global stock averages, the value of auto repair stocks seems to be more in-line with the broader economy.

The Boyd Group, a Winnipeg-based investment group, which owns Assured Automotive, saw gains in line with the broader economy on the morning of April 6. By mid-morning, the firm’s stock had risen by a little more than four percent.

Despite the resurgence, the stock remains 67 percent below its high-water mark, just shy of $170, which it hit on February 20.

In the 2010s, the Boyd Group’s units–which were later transformed into stocks–were the best-performing investment opportunity on the TSX.

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