# Automodular (TSE: AM)



## PMREdmonton

I was wondering if any of you know much about this company. It has been jumping off the screen in terms of some of my valuation screens lately and I wonder what is wrong with this company.

For starters this company is basically an assembler of sub-components of manufactured goods. Lately most of their work has been to do some assembly work for the local Ford plant. They have been trying to diversify and recently won a contract to do some assembly work for a Dutch company that manufactures wind mills (Vestas Nacelles A/S). The work they are getting from Ford has been pretty regular and can be estimated based on number of vehicles built at the local plant and Ford releases these numbers every month so the orders are still strong there. The windmill stuff will be a long-term contract and they have started working in the new wing that was built for this purpose in Brampton, ON.

So the nuts & bolts of the situation is the company is very profitable right now. They have a market cap of only 35.7M. Now of they have no debt and cash of 14.5M on the balance sheet and about 0.7M of inventory so EV is only about 23.5M. 

Now for that EV of 23.5M, EBITDA ttm was 23M so they are trading at EBITDA. P/B is 1. P/E is 2.9 over ttm. They are currently paying a quarterly dividend of 0.06 with a dividend yield of 14% and a payout ratio of only 40%. They have bought back about 23% of all their outstanding shares over the past 3 years. So when you add in stock buybacks over the past 3 years the shareholders are getting something like 20% a year back.

Despite all this good news the stock initially rocketed up last year to about $3 but since has been dropping pretty aggressively over the last few months and bottomed out at about 1.60 and is now hovering around 1.70. The other thing that makes me pause is most of their business had been with Ford but they have now diversified a bit into renewable energies so that is another potential negative for the company should they have a falling out with Ford. The last thing that makes me pause is the corporate directors have been selling lots of stock - but it has mostly been the ex-CEO lately Michael Blair which would make sense for him to diversify now that he is not in that role but it makes me nervous to see him selling and no one buying at these depressed levels.

Fortunately or unfortunately this stock is not followed by any analysts.

So I know some of you go around looking for value - what is wrong with this company for them to be so strong operationally (excellent margins) and financially and yet the stock is tanking.

I see this stock as a big bargain that is only slightly speculative mostly because of the degree of dependence on one company (Ford). They seem to be very shareholder friendly.

I have decided to buy a few shares on dips in my speculative dividend bin.

Any of you have any thoughts on this company that is in the extreme value bin?


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## doctrine

I own shares in this and have been buying over the last few months. They have about $0.75 in cash and make $0.18 a quarter - at $1.75, they could buy themselves out in six quarters if they weren't paying a dividend. They have a contract with Ford until 2014 so they could keep paying the dividend and then buy the company out in 2014. Very little in debt as well. 

There were a few big investors that owned 40%+ of the stock as of last year, and from what I gather, they're the ones that have been selling the stock. However, volume has really trickled down in the last month. 

There is a huge risk as they essentially rely on a single company for 80% of their revenue. The stock could drop to nearly nothing, or it could double or triple. I like the odds given that they have almost no debt and so much cash. I probably have enough shares, but this could definitely hit $3 again and if they hit another contract, it's possible.


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## londoncalling

Here is my take on the company from the small research I have done. I put this one on my watchlist a few months ago.

Pros

div payout @ 40%
low debt
lots of cash
share buybacks
huge insider and institutional ownership
little analyst coverage (almost none of the bnn talking heads)
great value metrics

Cons

auto industry if the NA auto industry makes a full recovery could be a huge payout
limited income supplies (Ford main and huge % of their revenue)
erratic dividend stream (cancelled from 04-08 then a special then a divvy then an increase)
low volume
cost of labour vs proximity to customers (wages vs. outsourcing)
high dividend rate could mean danger
lack of insider buys

I had forgotten about this stock thanks for the reminder. It is an excellent value play but it is also a riskier one. I would not make it a large holding but if I had some speculative dollars and a long horizon it is a possibility


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## PMREdmonton

LC, I like your list of pros and cons and agree with most of them.

I agree that lack of analyst coverage and the micro nature of the stock make it more likely you can find a huge bargain. The value nature of the stock is not being advertised to the individual investor and the institutional investor is probably not interested in them.

However, on the con section you mention outsourcing but I don't see how it would be easily outsourced to a low-cost district without moving vehicle assembly very far away. So I can appreciate that is a risk for many manufacturing jobs in North America I don't see it affecting them in particular. The major outsourcing concern would be Ford closing their plant and moving elsewhere such as Mexico, but maybe that is what you meant in the first place.

As far as a high div yield suggesting danger you have to remember they have a PE of 3, no debt and a payout ratio of 40%. The only concern is whether they would be a value trap but I don't see that here right now. They should continue to be profitable so long as Ford and other manufacturers contract out these sub-assembly jobs. I also think the fact that they only recently instituted a regular quarterly dividend has kept them off of divy investors screens.

As far as volume, I see that being bigger concern in a less stable business and for an institutional investor who will invest a few million into a single company and then would be unable to buy or sell without major impact costs. For the small individual investor putting up $5-20K I don't think liquidity should be a huge issue.


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## londoncalling

PMREdmonton said:


> LC, I like your list of pros and cons and agree with most of them.
> 
> I agree that lack of analyst coverage and the micro nature of the stock make it more likely you can find a huge bargain. The value nature of the stock is not being advertised to the individual investor and the institutional investor is probably not interested in them.
> 
> However, on the con section you mention outsourcing but I don't see how it would be easily outsourced to a low-cost district without moving vehicle assembly very far away. So I can appreciate that is a risk for many manufacturing jobs in North America I don't see it affecting them in particular. The major outsourcing concern would be Ford closing their plant and moving elsewhere such as Mexico, but maybe that is what you meant in the first place.


That is exactly what I was thinking.



PMREdmonton said:


> As far as a high div yield suggesting danger you have to remember they have a PE of 3, no debt and a payout ratio of 40%. The only concern is whether they would be a value trap but I don't see that here right now. They should continue to be profitable so long as Ford and other manufacturers contract out these sub-assembly jobs. I also think the fact that they only recently instituted a regular quarterly dividend has kept them off of divy investors screens.


I am more concerned with the erratic div flow on again off again then the yield itself. Although the payout is safe there is a greater possibility that they could decide to cut it out entirely as they have done in the past. They do not have a long history of payouts so they have no div record to sustain. I agree that this accounts for the stock missing this type of screen. and is my biggest concern.



PMREdmonton said:


> As far as volume, I see that being bigger concern in a less stable business and for an institutional investor who will invest a few million into a single company and then would be unable to buy or sell without major impact costs. For the small individual investor putting up $5-20K I don't think liquidity should be a huge issue.


volume can be a concern but as mentioned less so for a small investor. 

If I had more cash to allocate I would probably be in but I am trying to stockpile some $ for some bigger and lisky risky plays by fall. Who knows If I do get an itchy trigger finger before the next divvy I may jump in.


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## doctrine

No surprise, these guys announced a share buyback.

http://www.stockhouse.com/News/CanadianReleasesDetail.aspx?n=8580924

Stock has been below $2, when they have about $0.80 in cash and earn $0.18 a quarter. This stock is so undervalued, the whole buyback of up to 10% of the public float is only about $0.13 a share - they were essentially able to cover off the 6 cent dividend plus a 10% buyback in a single quarter. 

I've purchased recently at $1.77 and $1.73. Although risky, it's one of my favorite stocks to follow and would buy more if it wasn't my biggest position already.


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## PMREdmonton

doctrine said:


> No surprise, these guys announced a share buyback.
> 
> http://www.stockhouse.com/News/CanadianReleasesDetail.aspx?n=8580924
> 
> Stock has been below $2, when they have about $0.80 in cash and earn $0.18 a quarter. This stock is so undervalued, the whole buyback of up to 10% of the public float is only about $0.13 a share - they were essentially able to cover off the 6 cent dividend plus a 10% buyback in a single quarter.
> 
> I've purchased recently at $1.77 and $1.73. Although risky, it's one of my favorite stocks to follow and would buy more if it wasn't my biggest position already.


I bought some at around 1.65 or so. Then I bought some more at 1.75. I've been thinking about increasing them to a 5% weighting but for now have stopped at 2.5%. They are just such a screaming value right now. Based on their earnings I could easily see this being a $4-5 stock. The biggest overhang for them is negotiating an extension with Ford and hopefully diversifying their customer base a bit. Otherwise they seem to be extremely well run and are bleeding so much cash that they weren't sure what to do with all of it. Their ev/ebitda is 1 - I have never seen that before. Their PE is 3. Their dividend was 14% with a 40% payout ratio. Those are metrics that you just don't see in a company that is running well and not about to fall off of a cliff. I do think part of the issue in the fall of the stock was all the shares Blair was selling but he stopped in early July and then stock has taken off about 25% since he stopped.

I do think the divy and the share buybacks will be catalysts for this stock to appreciate. An extension with Ford probably means this stock doubles within a year. I do understand negotiations are ongoing but don't know of a timetable for an announcement. In the mean time you get to collect a very safe double digit dividend and watch the share count dwindle.


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## Spidey

Amazing coincidence that this thread appeared as I have been just checking out this stock after it appeared on a screen I put together. The one thing that worries me is that Ford appears to be their only client. I'll probably continue watching at this point but many of the fundamentals look very good.


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## londoncalling

Depending on the results of the next quarterly I may finally dip my toe in.


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## PMREdmonton

If Ford re-signs they are basically de-risked and you can expect a pretty rapid appreciation. The one thing that gives you hope about catching it before a big spike up is that there is very little institutional interest and there is no analyst coverage because their market cap is so small ($35M) and EV is even smaller ($23M). If anyone tried to buy up a big block of stock it would sky rocket in value so it just isn't feasible for these firms with Billions of AUM to take a stake here.

However, Ford isn't their only client They signed up with a wind power company to do some assembly jobs for them (read further upthread). However, the vast majority of their work is with Ford. I'm sure Ford doesn't mind dong business with sub-contractors since it is less unionized employees for them to deal with. I think the big issue is offshoring the production but the move recently has been manufacturing coming back to North America because of issues with IP, shipping costs, delays and poor quality control. It is also bad politics right now after Canadian and US citizens stepped up to bail out GM and Chrysler. While we didn't bail out Ford, they were able to use new terms negotiated for auto workers to win concessions from their own employees which have benefitted their bottom line - so I wouldn't expect any outsourcing for awhile but that doesn't guarantee they extend AM either.

So there is defnitely risk with this company but why else could you buy a company having enough EBITDA to buy themselves out in a single year.


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## martinv

Nice results today! Must be happy with that.


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## AnimeEd

I have a position in this due to this post. Thank you PMREdmonton for bringing it to our attention.


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## doctrine

Looking forward to reading the full report, but $0.22 is very good. Last time I checked they were around $0.70 a share in cash, that number should be up to $0.80 or so. Now that they have the issuer bid in place, there is a nice margin of safety on the bottom end of the stock price.


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## Ethan

I read the thread yesterday, went through the financials last night and bought a few hundred shares this morning before results were released. Thanks for the tip PMREdmonton, this company is priced very attractively.


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## PMREdmonton

You're very welcome - always glad to lend a helping hand. It is even better when that helping hand doesn't contain a grenade that I had not noticed. Here's hoping for a double for us all. 

Always remember this is a micro-cap - it is very risky and can be easily manipulated by traders. Don't venture here unless you have strong hands and can ride the volatility with a calm spirit. Just look at dips as opportunities to buy. The company has ridden up almost 30% since it bottomed so don't be surprised to see some profit taking cause a small dip somewhere in the near future. The ex-CEO could also start selling stocks now that the share price has appreciated and that would also be a drag on the share price appreciation. The biggest issue by far is negotiating an extension with Ford. I would have no hesitation about piling in to this stock and running it up to a 5% portfolio holding. I am really quite certain that this should be a $5 stock if Ford extends with us.


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## doctrine

This stock has a range of $1 to $3 in the last year, so yeah it can be a wild ride. Daily increases and decreases of 10% are not uncommon.


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## londoncalling

I opened a position on this one @ 2.06 after watching it off and on for the last 6 months. Wish I would have got in before the last quarterly report but I will still pick up an amazing sustainable yield while this microcap blossoms. I agree that the company is flush with cash and if it can extend its Ford contract (expires June 2014) and pick up a few others there is lots of upside to this little known stock. The share buyback and last report definitely convinced me things are looking good here.


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## Canuck

is the divy 24 cents or 44 cents a year? my Td account is showing 44 but the latest earnings states .06 a quarter. Did they cut it with the latest earnings?


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## doctrine

It's 6 cents a quarter, or 24 cents a year. In 2011 though, they paid a lot of special dividends (0.45 in total) so that may be screwing up the TD numbers.


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## PMREdmonton

The stock has been declining again.

However, it looks like our old friend ex-CEO Michael Blair is selling a whole bunch of stocks again. I think on one recent day he sold 185000 of 230000 stocks that traded that day. I would view his renewed selling as a chance to accumulate again. I don't know if he'll pummel this one down to 1.60 again but it'd be great if he did. Back down there you're talking about a 15% yield that is sustainable.

Unfortunately I fear he learned about the damage he was doing to his own bank account by dumping shares of a somewhat illiquid stock. I have now mostly accumulated all the shares I want to hold but I'd be tempted to accumulate if it got pounded down to 1.60 again. I still think it is a good buy here at 1.95 but it may get better if Blair wants to lquidate. Apparently he had 5M shares which was about 1/3 of the company. He has sold 2M shares but has 3M left. If he aggressively dumps bargains could be ahead but I think he learned his lesson from the last time. He stopped selling for 1 month and the stock went from 1.60 to 2.10 before he started dumping again. Since he started dumping there has been a 10% correction.


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## AnimeEd

Most of his shares were brought below $1. I bet he's pretty comfortable dumping them at this price.
http://www.quotemedia.com/results.php?qm_page=58404&qm_symbol=AM:CA

3M is a lot to sell...


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## AnimeEd

Crazy volume today. Company probably started the repurchase.


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## Jungle

Just wondering where some people have put their buy limit orders on this one. Also would you hold this one or sell if given a good gain?


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## PMREdmonton

The thing about this stock is if it is successful you will be well rewarded buying anywhere in its recent range which is 1.60 to 2.15. They have an EV/EBITDA of close to 1, no debt, about 1/3rd of the market cap is cash. They can maintain a 12% yield with a sustainable 40% payout ratio. 

The question is more do you want to own the stock. It is a very efficient and profitable microcap but it has risk because most of its earnings come from a single contract with Ford which ends in 2014. If you think that is not an issue or they'll find alternative business contracts then you are buying this stock at a super-discount. I really think that anywhere from 1.60 to 2.00 is a fine entry point. If you really want to get in cheap try to get in at 1.70 as there won't be much more downside but there is a lot of upside.

You have to remember that most of the selling done recently is the ex-CEO divesting himself of 1/3rd of the company. He had about 5M shares and has about 3M left and he has been liquidating. His liquidations drove this stock down from 3.00 to 1.60. If he continues to sell it would be a buying opportunity. If he doesn't and it doesn't dip you could miss out on a buying opportunity if you maintain low limit bids.

The new twist right now is the share buyback program. This company is loaded with cash and can buy back lots of shares with their cash if they want to do so. The share buyback may entirely counteract Blair's selling and result in a much more stable stock price. Only time will tell.


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## riseofamillionaire

PMREdmonton said:


> It is a very efficient and profitable microcap but it has risk because most of its earnings come from a single contract with Ford which ends in 2014.


This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.


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## AnimeEd

riseofamillionaire said:


> This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.


The contract is until June 2014 so almost 2 years out. They are already starting to quote the next project. Hopefully the Ford renews way before it is set to expire so the price won't go south too quickly. 
From the components that AM is being asked to manufacture, it looks Ford is passing them the low volume models. These are not cost-effective for Ford to manufacture themselves. In cases like this where the sub-contractor is already setup to do similar parts (fixture and tooling investment), the sub-contractor's quote can be quite competitive. Engineers who work works on these parts will also prefer that there is no vendor changes because it will mean they will have to build working relationships with a new vendor. Unless AM's quote is very high, I see their chances of winning the next project quite likely. AM has shown that they are willing to provide Ford with retroactive savings which is a huge plus from the buyer's prospective. 

I'm more concerned with the car models that AM is being asked to work on.
Ford Edge, Ford Flex, Lincoln MKX and Lincoln MKT 
Of course there is a market for these but these are not models which I find will take off.


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## riseofamillionaire

AnimeEd said:


> The contract is until June 2014 so almost 2 years out. They are already starting to quote the next project. Hopefully the Ford renews way before it is set to expire so the price won't go south too quickly.
> From the components that AM is being asked to manufacture, it looks Ford is passing them the low volume models. These are not cost-effective for Ford to manufacture themselves. In cases like this where the sub-contractor is already setup to do similar parts (fixture and tooling investment), the sub-contractor's quote can be quite competitive. Engineers who work works on these parts will also prefer that there is no vendor changes because it will mean they will have to build working relationships with a new vendor. Unless AM's quote is very high, I see their chances of winning the next project quite likely. AM has shown that they are willing to provide Ford with retroactive savings which is a huge plus from the buyer's prospective.
> 
> I'm more concerned with the car models that AM is being asked to work on.
> Ford Edge, Ford Flex, Lincoln MKX and Lincoln MKT
> Of course there is a market for these but these are not models which I find will take off.


I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers. 

If it was a long term contract, say 10 years, i think the stock could be much higher.

Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)


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## AnimeEd

riseofamillionaire said:


> I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers.
> 
> If it was a long term contract, say 10 years, i think the stock could be much higher.
> 
> Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)


I was wondering the same thing. The renewable stuff is great but I don't think it will materialize very quickly. It is also not their core competence. It would help their stock a lot if they have other auto plants on board. Would this be something that their investor relation could answer?


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## paidtowait

riseofamillionaire said:


> I can see Ford extending the contract, especially if the service AM provides has been good, which all indications says it is. Like you said, would be costly for Ford to form new relationships with other manufacturers and suppliers.
> 
> If it was a long term contract, say 10 years, i think the stock could be much higher.
> 
> Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)


The efficiency in Ford being supplied by AM is the minute by minute ability for parts to be ordered and delivered to the assembly line as needed, for this to work with other auto plants would require an AM plant in close proximity. If Chrysler or GM do not also have plants in Oakville, which I don't believe they do, Automodular would need to set up a new facility to service them. 

As for a new long term contract, while it will again lead to future stability it will certainly come with concessions probably more than that of the last extension in which AM saw a not insignificant reduction of margin both ongoing and retroactively.


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## Ethan

riseofamillionaire said:


> This kept me away, yet the stock is still very attractive on a valuation basis. If they extend that contract or gain more customers and business, this could be a huge winner - or it goes to 0 after the Ford contract expires. Tough call.


The stock is trading at a price-to-book ratio of 1 (net assets of $39M, market cap of $39M), so in the event that the contract is not renewed and the company is liquidated, the stock would likely not fall to $0. That's the value I see in the company, it is highly profitable, yet could be liquidated for its current market price.


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## Ethan

riseofamillionaire said:


> Does anyone know if they are pursuing other customers, or have the compacity to accomodate more customers? (Chrysler, GM etc.)


As at year end, AutoModular was suing GM for $25M for breach of contract; AM used to perform work for GM. I think that relationship has been severed.

I can't find anything in the Q1 or Q2 reports on the litigation, does anyone know what happened to that lawsuit?


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## DavidJD

Does anyone else see this type/size of company be a target for an acquisition? Nothing irks a larger company doing similar work than a smaller one that is making money on its own. I know very little (okay nothing) about this industry and would not know if this is a likely situation.


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## PMREdmonton

They have been around for a long time so I don't think they are about to be acquired imminently.

The buyer would have to pay a large premium to current share price given the free cash flow generated.


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## timelessfinance

*I'm normally wary...*

... of special dividends (in this case I'd say they were "extraordinary" special dividends). But it seems they've locked down annual yield at $0.24. I'm definitely thinking of picking this up.

I'm interested because where the heck else can you get a 10%+ yield in ELIGIBLE dividends from a company that has good cash flow -- sure, it's in the auto sector which is risky BUT how many other manufacturing stocks with this kind of yield can a person find on the TSX?? It actually seems like an opportunity to add a couple percent of diversification. Given its cash level, low debt, and good PB, it seems almost irresistible.

The only real, big huge negative that I see is the fact that Ford pretty much has a monopsony (yes, monopSONY) over Automodular. They're trying to diversify (a wind energy plant in Brantford?) but if they don't get work from the Big F after 2014 they're toast. In which case, they'd be best to fold preemptively and distribute what's left cause (not that any company would EVER do that, and they'd just begin a slow, painful descent into oblivion). I think I'm up for the gamble.


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## AnimeEd

I got a reply from Chris Nutt (CEO) about the GM lawsuit.



> Yes, the lawsuit against GM is still proceeding. Automodular will provide updates when there is material information to share with its investors. Unfortunately, the legal process is not a quick one.
> 
> Regards,
> Christopher Nutt
> President and CEO
> Automodular Corporation


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## Ethan

AnimeEd said:


> I got a reply from Chris Nutt (CEO) about the GM lawsuit.


Pretty cool that the CEO responds to investor e-mails.

Thanks for sharing.


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## Jungle

This is coming down again a little.. I might be watching it very close and thinking about a limit order under $1.80. Since the big risk comes from their contract renewal, I would only invest enough where if I lost it all, I would be able to cover it in a couple weeks with income.


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## PMREdmonton

If you look at the book value and cash on hand, even if they folded tomorrow you would get a substantial amount of your money back at this valuation. Heck the break up value is probably more than the market cap. They have no debt on the books and lots of cash. 

They may even be able to sign with another company to do sub-assembly jobs. 

The contract is also for two more years which means at present earnings clip they'll make about 2/3 of the market cap by then anyway.

I don't see a huge risk even in the worst scenario because the valuation is that good.


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## AnimeEd

Happy dividend payment date!


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## doctrine

Got mine yesterday - my third dividend with them and still enjoying my holdings.


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## Ethan

Is the share price being held down by possible strike action by the CAW? I imagine a CAW strike against Ford would temporarily eliminate the need for sub-assembled parts.

http://online.wsj.com/article/SB10000872396390443686004577633361193614908.html


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## blin10

why even mess with stocks like this? 40mill market cap and 1.90 share price which was 0.19 three years ago? no thanks.. just my opinion and not dissing anyone here


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## AnimeEd

blin10 said:


> why even mess with stocks like this? 40mill market cap and 1.90 share price which was 0.19 three years ago? no thanks.. just my opinion and not dissing anyone here


Value


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## GoldStone

Is their book value realistic? In other words, can they liquidate anywhere close to the book value if Ford doesn't renew the contract?

"Manufacturing companies offer a good example of how depreciation can affect book value. These companies have to pay huge amounts of money for their equipment, but the resale value for equipment usually goes down faster than a company is required to depreciate it under accounting rules. As the equipment becomes outdated, it moves closer to being worthless. With book value, it doesn't matter what companies paid for the equipment - it matters what they can sell it for. If the book value is based largely on equipment rather than something that doesn't rapidly depreciate (oil, land, etc), it's vital that you look beyond the ratio and into the components."


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## doctrine

In 2011, they depreciated their plant assets down from $26M to $15M and are now down close to $12M. So, I would say the breakup value based on current book is very realistic. Even if they were worth 30 cents on the dollar, the scenario with no contract renewals at all and a breakup of the company in 2014 based on assets would see at least the current price returned. In my mind, if they renew anything then its going to be very positive for the company. It's a total cash flow machine for the next 2 years.


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## Jungle

So lets say they don't renew the contract and stop making money. Will the shareholders get their money back?


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## Ethan

I thought that this news would have helped the share price:

http://www.theglobeandmail.com/report-on-business/caw-ford-reach-4-year-labour-deal/article4549186/

I still think this company is a steal at it's current share price. Once I get called out of a different position later this week, I'll be adding to my position in AM.


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## Jungle

Just a heads up, stock dropped a bit today. If anyone wanted to get in these levels, have a look.


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## BullAllTheWay

Jungle said:


> Just a heads up, stock dropped a bit today. If anyone wanted to get in these levels, have a look.


And the company buys back its stock on a constant basis.


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## timelessfinance

I'm in Automodular now. Wrote about it today.


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## BullAllTheWay

I have been watching this one for quite a while and decided to jump in yesterday. Excellent results from Ford this week and the new labour contract were the clinchers.


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## doctrine

I'm still in. Actually, I added a few shares three weeks ago when it was around 1.75. Results should be out in the next week, will keep an eye on it.


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## BullAllTheWay

doctrine said:


> I'm still in. Actually, I added a few shares three weeks ago when it was around 1.75. Results should be out in the next week, will keep an eye on it.


Results should be good, and the outlook for the current quarter is positive. Look at auto sales for October.


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## DavidJD

I have about a 1000 of these at a book value of $1.83ish. I have about the same amount in my wife's TFSA that I picked up at $2.40 and before it sailed up to $3 a while back. Missed the opportunity for a quick gain (sorry honey!) but think it will claw its way back up to high $2 range again. Dividend is appreciated in the TFSAs.


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## liquidfinance

I'm still thinking about taking a small position in this one. Will wait to see what they have to say in the results now although knowing my look the price will spike and I will miss the opportunity.


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## paidtowait

BullAllTheWay said:


> Results should be good, and the outlook for the current quarter is positive. Look at auto sales for October.


Q3 sales of Oakville produced vehicles were up on 1.5% over Q2. 

I think the results might disappoint some.


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## PMREdmonton

But this is a company priced for markedly negative rates of future growth and even bankruptcy/liquidation.

If they are maintaining revenues and profits then they are markedly undervalued as is.

I think they are a screaming bargain at Book Value. They are just hugely undervalued at this price point. Once the Ford contract situation resolves they should be worth far more with the generous regular quarterly dividend, stock buybacks and the upcoming cessation of liquidation of shares by the ex-CEO Blair. Even if the Ford contract is not renewed two years from now catalysts may include some green projects, contracts from other manufacturers, litigation against GM or just plain liquidation of the company which should get you out at even money at the worst (once two more years of contract work and assets at liquidation value are factored in).

I do agree there can certainly be a fair bit of volatility in this company and there can even be long periods of poor share price performance but if you hang tough you will very likely be rewarded in the long run. The market just hates uncertaintly and they punish companies with uncertain futures. 

If you have weak hands, do not buy this stock. If you fear the share price tanking by 60% then don't buy this stock as these are strong possibilities in the next year.


----------



## BullAllTheWay

paidtowait said:


> Q3 sales of Oakville produced vehicles were up on 1.5% over Q2.
> 
> I think the results might disappoint some.


You're right. Obviously, production was not very good at Oakville. At the current valuation, expectations are close to nil for AM. IMO, the new labour contract and new platforms in the work should secure work at the plant for a number of years. And I say nothing about the windmill manufacturing.


----------



## doctrine

Last time I did a basic estimate of earnings over the next 18 months, the stock is essentially worth around $2.25 or so, assuming they execute their current contracts to completion and do not get another one. This also assumes very little return on actual assets, so this number could potentially be as large as $2.50. That is why I have been continuing to add, especially below $2. It is extremely likely they will get new contracts, and even if they're not as profitable, you are essentially buying into that potential for free. Of course, you don't know if the company would liquidate, probably not, but they have survived a number of large recessions including the latest which was particularly hard on the auto industry.


----------



## DavidJD

Automodular Corporation: Third Quarter 2012 Results 
AJAX, ONTARIO, Nov 06, 2012 (MARKETWIRE via COMTEX) -- Automodular Corporation /quotes/zigman/23757 CA:AM +5.56% ("Automodular") reports net earnings of $4.2 million or $0.21 per share for the three months ended September 30, 2012 compared to $2.3 million or $0.12 per share for the same three-month period ended September 30, 2011. For the nine months ended September 30, 2012 and 2011 Automodular reports net earnings of $12.3 million and $8.4 million or $0.61 and $0.42 per share, respectively. 

The results for the first three quarters of the year are summarized below (all figures in '000s except per share amounts): 




Three months ended Nine months ended
September 30 September 30
2012 2011 2012 2011
$ $ $ $
----------------------------------------------------------------------------
Sales 35,359 18,969 88,878 58,266
Net earnings 4,243 2,331 12,262 8,429
Per share - basic 0.21 0.12 0.61 0.42
Per share - diluted 0.21 0.12 0.60 0.42
----------------------------------------------------------------------------
----------------------------------------------------------------------------





The Board of Directors has declared a total dividend of $0.26 composed of a regular quarterly dividend of $0.06 and a special dividend of $0.20 payable December 4, 2012 to shareholders of record November 20, 2012. 

Automodular Corporation is a supplier of sub-assembly, sequencing and transportation services to the automotive industry - Ford Motor Company's Oakville Assembly Plant - and the renewable energy industry - Vestas Nacelles A/S. The Company has three operating facilities and employs approximately 560 people.


----------



## BullAllTheWay

DavidJD said:


> Automodular Corporation: Third Quarter 2012 Results
> AJAX, ONTARIO, Nov 06, 2012 (MARKETWIRE via COMTEX) -- Automodular Corporation /quotes/zigman/23757 CA:AM +5.56% ("Automodular") reports net earnings of $4.2 million or $0.21 per share for the three months ended September 30, 2012 compared to $2.3 million or $0.12 per share for the same three-month period ended September 30, 2011. For the nine months ended September 30, 2012 and 2011 Automodular reports net earnings of $12.3 million and $8.4 million or $0.61 and $0.42 per share, respectively.
> 
> The results for the first three quarters of the year are summarized below (all figures in '000s except per share amounts):
> 
> 
> 
> 
> Three months ended Nine months ended
> September 30 September 30
> 2012 2011 2012 2011
> $ $ $ $
> ----------------------------------------------------------------------------
> Sales 35,359 18,969 88,878 58,266
> Net earnings 4,243 2,331 12,262 8,429
> Per share - basic 0.21 0.12 0.61 0.42
> Per share - diluted 0.21 0.12 0.60 0.42
> ----------------------------------------------------------------------------
> ----------------------------------------------------------------------------
> 
> 
> 
> 
> 
> The Board of Directors has declared a total dividend of $0.26 composed of a regular quarterly dividend of $0.06 and a special dividend of $0.20 payable December 4, 2012 to shareholders of record November 20, 2012.
> 
> Automodular Corporation is a supplier of sub-assembly, sequencing and transportation services to the automotive industry - Ford Motor Company's Oakville Assembly Plant - and the renewable energy industry - Vestas Nacelles A/S. The Company has three operating facilities and employs approximately 560 people.


Results beyond my expectations. I am very glad I bought a few shares last week.
Way to go Automodular!


----------



## Ethan

Woohoo!!!!!!!!!!!!

Thanks for bringing my attention to this stock PMREdmonton. If your name was PMRSaskatoon I'd offer to take you out for a beer after today's results.


----------



## camfire

Bought at $1.96 a while ago and sold today for $2.35. Will look at getting back in if it falls below $2 again.


----------



## DavidJD

_The Board of Directors has declared a total dividend of $0.26 composed of a regular quarterly dividend of $0.06 and a special dividend of $0.20 payable December 4, 2012 to shareholders of record November 20, 2012. _

So if I (wife and I) have 1,800 that means the special dividend is an extra $360.00 in the TFSA? Seems outrageous. Plus the $108 in regular Q dividends...

Other bonus is that I bought half of my 800 when the price dipped to $1.63 so my book value is $1.83/share and my wife's is still $2.40. So at the new sp of $2.33ish, I have about 26% gains and she has a much smaller loss (not incl. dividends). 

These press releases are fun.

Now I hope EIF announces some great news on the 12th...


----------



## AnimeEd

Wow.... I made a lot today but the Ford contract is still a lingering concern. Hopefully this special dividend is a sign that the negotiation is going well....


----------



## Jungle

Congrats to those holding. My guess is they will probably renew the contract but ask for cost saving measures. Going by the cash this company is making, I don't see that a concern. 

The only concern is if they have a competitor who can bid on the contract. NO contract= no money. More risk= more reward.


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## RParks

I hold this, and now wish I held more!

What if a guy were to buy more now, just for the dividend? Could that be maneuvered to make it worthwhile? i.e. will the stock price fall back under $2 after the dividend is paid out?


----------



## PMREdmonton

Ethan said:


> Woohoo!!!!!!!!!!!!
> 
> Thanks for bringing my attention to this stock PMREdmonton. If your name was PMRSaskatoon I'd offer to take you out for a beer after today's results.


I'll gladly drink that virtual beer as Saskatoon is a long trip for me.

GLTA

I don't think it is too late for those who want to jump onboard to grab some shares. The stock trades (based on annualized earnings of the past 9 months in the fiscal year) at a P/E of 2.5. They pay a very affordable regular dividend of about 14% and just threw on top an extra special dividend of 10% of the stock price.

Realistically, they should trade at a P/E of 8 at the very least which would be a triple of the current stock price.

The only thing holding them back is uncertainty and even if their Ford contract is not renewed and they can't find anything else uesful to do, by the time they operate to the expiration of their contract they should generate cash equivalent to their share price.

This is clearly a very shareholder friendly management that is doing a great job of generating cash flow and then handing it to the shareholders. Other managements should pay attention to these guys.


----------



## doctrine

I'll be looking into their financial report to check out the numbers. AM is my largest holding, and suffice to say the special dividend is going to be quite large and quite a nice Christmas bonus. I suspect there will be a large drop on 21 November once the dividend passes. Interestingly, the $0.26 total dividend announcement has resulted in a $0.35 increase in value today, larger than just the dividend. If there are others interested in getting in, that may be the date (or soon after) to get in. This company has a history of returning cash to shareholders, and they're making themselves rich at these valuations.


----------



## liquidfinance

doctrine said:


> I'll be looking into their financial report to check out the numbers. AM is my largest holding, and suffice to say the special dividend is going to be quite large and quite a nice Christmas bonus. I suspect there will be a large drop on 21 November once the dividend passes. Interestingly, the $0.26 total dividend announcement has resulted in a $0.35 increase in value today, larger than just the dividend. If there are others interested in getting in, that may be the date (or soon after) to get in. This company has a history of returning cash to shareholders, and they're making themselves rich at these valuations.


Yeah, i'm going to keep my eye on it. Looks like I missed the boat at the minute. I was hoping the results would reaffirm peoples views with stable share price allowing me to get in. I didn't expect the massive increase. 

Congrats to all holding.


----------



## jamesbe

I missed the low by about an hour, but bought anyways and it's still up another 5% this morning. May not be too late to get in, get out before the big drop though and go back in on the 22nd most likely.


----------



## doctrine

I've reviewed their documents. Some notes:

Cash per share: $1.15
Profit per share in quarter $0.21. Note: fully paid taxes (not deferred)
Expenses down YTD and compared to last year
ROE of ~40%
Equipment depreciation continues..$11.8M on books, down from $15.4M a year ago
Regular payout ratio down to 29.7% (even with the huge special dividend, its about 50% over the last year)
Renewable assembly contract was fully 30% of their revenues YTD

The cash per share is huge. Anyone could have picked this stock up for less than $1.80 a month ago, and they had $1.15 cash on the books, paid a $0.26 dividend and are still generating in excess of $0.20 a share per quarter. If they weren't already 11% of my portfolio (of 24 stocks), I'd be in for more. 

Might be a good buying opportunity on Nov 21 when people who potentially came onboard for the special dividend back out. High risk as always though, but happy to get cash in the bank - I have about $0.44/share in dividends on an ACB around $2.


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## jamesbe

LOL as expected. 20 cents a share paid out today. So the stock drops like a ROCK!


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## az_13

I am somewhat new at this so I realize this is probably a dumb question, but why did the price drop today? Werent we expecting it to happen on Nov 21st, due to the fact that the dividend was payable to shareholders of record on nov 20th?


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## doctrine

$0.26 actually paid out, and it's down $0.18 currently - not bad.


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## jamesbe

I'm holding


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## cannadian

Wish I ventured into this thread earlier.

Looked into the company, and if you write off their long-term assets 75%+ (who knows how much they could really get in a fire sale...) and factor in that their contract with Ford extends another 18 months, the liquidation value of the company would be between 35 and 45 million when their contract with Ford expires.

So on the downside - if the contract doesn't get extended and the company liquidates, you get paid your original investment
On the upside - if the contract is renewed the stock could easily appreciate 200-300% and you can collect a 10%+ dividend for another 3-4 years.

So the risk is basically 0 and the reward 200%+

The only thing is they might not liquidate the company if the contract expires ...


But other than that one risk, this looks like a fabulous opportunity to me (though I'm still a beginner), if the stock price dips below $1.80 I'll buy a bunch of it.


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## doctrine

To answer az_13, I thought it was Nov 21, but then classically forgot that the shareholders of record means that the trade has to settle. Settling takes three business days, so to be a shareholder of record on 20 November, you have to purchase three business days earlier or 15 Nov.


----------



## az_13

makes sense, thank you for that explanation.



doctrine said:


> To answer az_13, I thought it was Nov 21, but then classically forgot that the shareholders of record means that the trade has to settle. Settling takes three business days, so to be a shareholder of record on 20 November, you have to purchase three business days earlier or 15 Nov.


----------



## cannadian

I'm now on board with 1500 shares at $2!

Took another look at this company and I estimate that based on the free cash flow they've been generating (including all dividends to-be-paid), writing off the long-term assets as being nearly worthless (to build a margin of safety), and subtracting the total liabilities from the current assets (since I believe Ford owes AM most of the receivables I assume those to be as good as cash) - the liquidation value of the company for today's shareholders 18 months out (when the contract with Ford expires) is easily in excess of $40 million, probably closer to $50 million.

Since I was able to pick the company up for $40 million on the dot I believe my downside risk is negative to zero (on a logical basis anyways, obviously the market is not always logical!), and that my upside is in excess of 250%.

The only risk to my principal, as I see it, is the company not liquidating its assets if Ford doesn't extend the contract and beginning a slow spiral to becoming worthless.

Mr. Market is giving us great odds I believe!


----------



## Ethan

cannadian said:


> Mr. Market is giving us great odds I believe!


Bingo!


----------



## cannadian

Bought another 925 shares for a total of 2,425 shares @ $2.00.

This is a good sized holding for a puny portfolio like mine, so I'm done accumulating - but if it dips below $1.50 I'll probably add a bunch.

Working on a "write-up" if anybody wants to check it out when I'm done. I like to do these mini reports so that if the stock ever drops I can revisit precisely why I thought it was a great investment idea when I originally bought - it helps keep the mental fortitude up in these volatile markets I find..


----------



## az_13

That would be great, id like to read your write up!


----------



## Ethan

cannadian said:


> Working on a "write-up" if anybody wants to check it out when I'm done.


Yes please.


----------



## doctrine

12/5/12 div div 0 0.00 $2,600.00 automodular corp cash div on 10000 shs rec 11/20/12 pay 12/04/12 cad am


----------



## DavidJD

doctrine said:


> 12/5/12 div div 0 0.00 $2,600.00 automodular corp cash div on 10000 shs rec 11/20/12 pay 12/04/12 cad am


Swoon.

Nice. If you look back some were really expecting terrible results for this company. Good for you.

I still think this is a target for a takeover sometime soon. I can't see many other players content letting this little company make such a profit and push it all out as (gasp) dividends and special dividends.

Back over $3 when that happens.


----------



## cannadian

Here it is, let me know what you guys think - I just started getting into stocks last year: http://ratracefreedom.net/2012/12/11/automodular-corporation/

It's pretty dry haha. Love this little company though.


----------



## jamesbe

Thanks for that. I learned a lot.

I bought 500 shares at $2 last month and collected the dividend i may take more after reading that...


----------



## Ethan

Very well done, I agree with your analysis.


----------



## underemployedactor

Hey nice job. I probably won't buy it, but enjoyed your analysis.


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## doctrine

Good analysis. I did a similar one 6 months ago, and essentially came back with a worst case scenario of about a 20% gain over 2 years. I've received quite a bit in dividends already and was in for the special dividend, so I'm quite pleased so far. I would say that the stock is priced for this worst case scenario (discount rate of 10% a year) so anything new contracts are going to be free money above that. I also noted the third shift going on at Oakville as a positive. It's definitely a little more risky now than it was, say, 10 months ago when they still had 2.5 years on the Ford contract and just signed the windmill one, but we'll see if they come up with anything.


----------



## BullAllTheWay

cannadian said:


> Here it is, let me know what you guys think - I just started getting into stocks last year: http://ratracefreedom.net/2012/12/11/automodular-corporation/
> 
> It's pretty dry haha. Love this little company though.


Very well written. I really liked reading it. Fine job for someone who has just started getting into stocks. I have no hesitation to say that you will have a great success. Thank you and good luck!


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## cannadian

Thanks guys, I'm going to start reading more of pmredmonton's threads from now on haha


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## londoncalling

cannadian: just read your writeup on AM... I would agree that your analysis is clear, concise and easy to follow...keep up the good work! :encouragement:


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## DavidJD

AM was up 7.25% today...


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## londoncalling

:chuncky: any reason why? or just fiscal cliff can kicking and a nice bump? I understand that this small cap (like most) has some volatility. I tried to find a reason and came up empty.


Never look a gift stock in the mouth :stupid:


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## HaroldCrump

It must be because of the Ford numbers announced today, since Ford is AM's largest customer.


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## londoncalling

Yes Harold that does make sense. 


http://tmx.quotemedia.com/article.php?newsid=56994747&qm_symbol=F:US


Thank you for alerting a tired mind at a late hour

Cheers


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## doctrine

I am up 26.4% on my AM position as of today, including dividends. Next dividend payment should be in February. Keeping an eye on them for news but all has been very quiet, except for the reports from Ford and the Canadian automobile industry in general (sales up, Oakville production up and addition of a third shift).


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## DavidJD

There is more good news about the CDN auto industry...and AM most likely...
_"Prime Minister Stephen Harper is making an announcement today at the Ford Motor Co. plant in Oakville, Ont., where he's expected to announce a five-year renewal of a fund to stimulate research and innovation in Canada's automotive industry.

Harper's news conference is scheduled to start just after noon ET.

The Prime Minister's Office confirmed a report Friday that the federal government will renew a fund first established in 2008 as part of efforts to bail out Canada's struggling automotive industry early in the last recession.

The five-year Automotive Innovation Fund required manufacturers to put up some of their own money before applying for funding targeted at specific research and development projects. The subsidy program was touted as an incentive for automakers to keep their Canadian plants open and protect jobs here.

The government says its original investment stimulated some $1.6 billion in innovative projects across the industry. The announcement Friday is expected to commit another $250 million to the fund over five more years."_
http://www.cbc.ca/news/business/sto...motive-innovation-fund-harper-ford-plant.html


----------



## Addy

Thanks for this post OP. I bought 500 shares on either Thursday or Friday and I'm already up over 11%. Not sure if AM has staying power but it's interesting.


----------



## doctrine

Up 25% in less than a week. "Not bad". With the increased volume, I'd suspect there's someone out there buying on all the good auto news.


----------



## jamesbe

Yeah kicking myself for not buying more at $2.


----------



## Addy

And it rockets up even more today. Anyone know why the sudden rise?

Edit: Could it still be a run off from the Ford numbers announced last week?


----------



## DavidJD

It had soared to mid forties when they announced the special dividend and then it tanked to above $2 after the ex. div date. This may be just a natural return to where it was hovering months ago. However since then, there was the special dividend and a stronger outlook for the Can auto industry. I think some contracts and lawsuits are becoming less of a concern for investors.

My Book Value is $1.83 and got the special dividend so I am pleased.

I still think this will be bought out some time.


----------



## jamesbe

ACQ is also rocketing up with the good news for the auto industry.

The only 2 stocks going up for me today lol


----------



## Addy

Has anyone thought of their pull out price/%?

I considered picking up ACQ but I'm afraid I'm too late, should have would have could have I guess


----------



## PMREdmonton

Addy said:


> Has anyone thought of their pull out price/%?
> 
> I considered picking up ACQ but I'm afraid I'm too late, should have would have could have I guess


Depends on how safe you want to play it. I bought some around 1.65 so am up 75% from that point including 0.32 in dividends. bought some more at 1.80 and 2.00. I think no one could fault anyone for taking some profits now and then waiting to see if there is another correction as often happens when a microcap blows up parabolically. 

As for value, I think 5.00 is very achievable based on earnings if Ford contract is renewed and green projects take off. If Ford does not renew there could be a major sell-off and that is the risk you are taking with holding this one. I would not buy at this price due to uncertainty. It was a no-brainer at 1.65 at a big discount to book value and 0.80 net cash on the books.


----------



## doctrine

I don't think you'd see the stock up much past $3 before any more long term deals are announced. Once they are though, it could be a $4 stock very quickly. Since I'm also in at a much lower price and also received almost $0.50 in dividends, I am happy to hold and see what happens.


----------



## AnimeEd

It closed at $2.70 today! Not sure what's going on but there are definitely money flowing into this thing.


----------



## thenegotiator

but of coarse there is.
someone from CMF is buying at the highs?


----------



## doctrine

I doubt it, volume has been nearly 1.8M shares this year, which is 15% of the public float - has to be an institution somewhere. Minus cash, the P/E is still only about 3, maybe a little less. Auto industry news has been all strong this week, with predictions of record auto sales in 2013 and 2014. Ford doubled it's dividend last week and is up 40% since October. I always try to have low expectations but I did feel like if they renew with Ford then it's worth at least $4 even with lower margins.


----------



## thenegotiator

doc
not sure when volume picked up today but if it is institutional they are getting too late to the party?
i would not risk at this prices.
but ... u can be right.
cheers.
the big move has happened already.


----------



## AnimeEd

thenegotiator said:


> doc
> not sure when volume picked up today but if it is institutional they are getting too late to the party?
> i would not risk at this prices.
> but ... u can be right.
> cheers.
> the big move has happened already.


But then you are not playing with other people's money like institutions. :hopelessness:


----------



## DavidJD

Weeee!

I like checking in on AM and seeing 5%+ increases...almost daily.

Does nobody else think this is target for acquisition? It seems like a good size and is making money.


----------



## RParks

And down she goes.


----------



## jamesbe

It went up 5% a day for like a week, going down a little is no biggie.


----------



## AnimeEd

I think people were expecting more than just regular dividend


----------



## GoldStone

jamesbe said:


> It went up 5% a day for like a week, going down a little is no biggie.


Tell it to the folks who bought in the 2.90-2.95 range a few days ago. They are down 15-17%.


----------



## jamesbe

Well those people are silly


----------



## doctrine

Not sure it's a great buy at $2.9, but most of us here are in at $2 and lower. Not surprised there wasn't a dividend increase, probably wouldn't be until they got a new contract. That being said, there's still a huge possibility of a special dividend at the end of the year again - they're still a cash machine. I had more than 20% in dividends last year. Wouldn't be surprised to get the same this year.


----------



## liquidfinance

doctrine said:


> Not sure it's a great buy at $2.9, but most of us here are in at $2 and lower. Not surprised there wasn't a dividend increase, probably wouldn't be until they got a new contract. That being said, there's still a huge possibility of a special dividend at the end of the year again - they're still a cash machine. I had more than 20% in dividends last year. Wouldn't be surprised to get the same this year.


Kicking myself for not getting into this one. Crazy to think of some previous stock purchases I have made and yet avoided this one. 
I'm not going to chase it now.


----------



## thenegotiator

doctrine said:


> Not sure it's a great buy at $2.9, but most of us here are in at $2 and lower. Not surprised there wasn't a dividend increase, probably wouldn't be until they got a new contract. That being said, there's still a huge possibility of a special dividend at the end of the year again - they're still a cash machine. I had more than 20% in dividends last year. Wouldn't be surprised to get the same this year.


doc.
where do u see this stock a year from now?
i am just curious here.
TIA


----------



## DavidJD

Markets have been open half and hour and already breaking yesterday's 52-week high at 3.05.

Enjoy...


----------



## jamesbe

If only I bought more than 500 shares. Better than a kick in the teeth either way


----------



## doctrine

I'm not sure where the share price will be a year from now. I'd say $3 plus 10-12% in dividends but it's sitting at $3.05 now.


----------



## AnimeEd

Code:


Filing Date 	Transaction Date 	Insider Name 	Ownership Type 	Securities 	Nature of transaction 	# or value acquired or disposed of 	Price
Feb 11/13 	Feb 8/13 	 Gazo, James 	Direct Ownership 	Common Shares 	97 - Other 	17,631 	$2.84
Feb 11/13 	Feb 8/13 	 Doyle, Travis 	Direct Ownership 	Common Shares 	97 - Other 	17,631 	$2.84
Feb 11/13 	Feb 8/13 	 Nutt, Christopher Stephen 	Direct Ownership 	Common Shares 	97 - Other 	11,881 	$2.84
Feb 11/13 	Feb 8/13 	 Nutt, Christopher Stephen 	Indirect Ownership 	Common Shares 	97 - Other 	5,750 	$2.84

insiders are buying


----------



## GoldStone

Nature of transaction
97 - Other

I'm not sure what it is, but it's NOT a public market buy.

Most recent public market buy was in November:


----------



## GoldStone

Note that 3 different insiders acquired the same uneven number of shares (17,631), at the same price, on the same day. Those shares were likely awarded, not bought.


----------



## DavidJD

I am still suspicious that this company will be bought.


----------



## doctrine

I have done some portfolio rebalancing in the last couple of weeks. I bet quite a bit on AM last year - it was my biggest holding in July 2012 when it was still $1.75! So I sold half my shares (5000), it was just too much for a single high risk company like this. I've received about $4000 in dividends and over $5000 in capital gains (sold at $3.10 on 12 Feb and of course watched it rise to $3.23 the next day), so I'm pretty much holding the remaining shares for free. 

Did I mention that I really, really like small cap, high yielding dividend companies like this?


----------



## liquidfinance

doctrine said:


> I have done some portfolio rebalancing in the last couple of weeks. I bet quite a bit on AM last year - it was my biggest holding in July 2012 when it was still $1.75! So I sold half my shares (5000), it was just too much for a single high risk company like this. I've received about $4000 in dividends and over $5000 in capital gains (sold at $3.10 on 12 Feb and of course watched it rise to $3.23 the next day), so I'm pretty much holding the remaining shares for free.
> 
> Did I mention that I really, really like small cap, high yielding dividend companies like this?


You have no idea how much I am kicking myself for not getting into this one. :rolleyes2:


----------



## DavidJD

*Automodular Corporation: 2012 Results*AJAX, ONTARIO, Mar 06, 2013 (MARKETWIRE via COMTEX) -- Automodular Corporation ("Automodular") reports fourth quarter net earnings of $4.5 million or $0.22 per share compared to net earnings of $3.8 million or $0.18 per share in the same period in 2011. Earnings for the year ended December 31, 2012 totaled $16.8 million or $0.83 per share compared to 2011 net earnings of $12.2 million or $0.61 per share. 

Automodular's audited consolidated financial statements, management discussion and analysis and annual information form for the year ended December 31, 2012 will be filed on SEDAR on or about March 8, 2013 and the complete annual report together with the management information circular and notice of meeting will be mailed to shareholders on or about April 15, 2013.


----------



## cannadian

This company is like an ATM hah, very pleased with these results.

There's some risk with the stock at these prices, but if Ford extends the contract there's still some serious upside.


----------



## Yoqui

*blediic 4-inch*

I was in the stock during the Oct-Nov period, made a bit and got out and sadly missed the recent rally. This stock can probably go to $6 if it gets the ford contract renewed or back down to $2 if it doesn't imo. They said they would know when they'd get an answer from Ford which would be in the late 2012 to early 2013, and that's been obviously delayed so I'm not liking the odds. This stock is definitely on my watch list though, if they get their contract renewed and this stock doesn't jump too much from it then I am definitely getting back in.


----------



## PMREdmonton

At this point I have a double with this stock.

However, I have decided to exit my position now at this stock price due to the risk of the Ford contract not being renewed. I would have liked to have had word by now and worry that the deal may have gotten bogged down. As they are now nearly totally dependent on this one contract for their future revenue I think the risk at this price point outweighs the benefit. 

I could be wrong and a renewal could lead to a rapid 50% gain from the current stock price but there is a saying about pigs getting slaughtered. I have fed from this trough enough for now.

I may re-initiate a position during a stock correction. If you're a momentum trader then this trend still looks very positive. I just worry that on such a small nanocap with poor liquidity a stampede out of the stock on a deal failure could collapse the stock price to under 1.00 in just a few big morning trades at the opening whistle.


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## doctrine

It is extremely volatile. I agree with our analysis of a worst case scenario of $2-$2.25 a share with no renewal. That's probably unlikely, but it made the shares much more appealing at $1.80 than $3.20. I have been investing the proceeds of my double in a variety of other companies. The $2600 dividend cheque I received last fall is probably going to be a personal record for quite some time!


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## BullAllTheWay

PMREdmonton said:


> At this point I have a double with this stock.
> 
> However, I have decided to exit my position now at this stock price due to the risk of the Ford contract not being renewed. I would have liked to have had word by now and worry that the deal may have gotten bogged down. As they are now nearly totally dependent on this one contract for their future revenue I think the risk at this price point outweighs the benefit.
> 
> I could be wrong and a renewal could lead to a rapid 50% gain from the current stock price but there is a saying about pigs getting slaughtered. I have fed from this trough enough for now.
> 
> I may re-initiate a position during a stock correction. If you're a momentum trader then this trend still looks very positive. I just worry that on such a small nanocap with poor liquidity a stampede out of the stock on a deal failure could collapse the stock price to under 1.00 in just a few big morning trades at the opening whistle.


I understand your point of view, but I keep my shares nonetheless. There is a risk, for sure, but I believe that the potential reward outweights it fully. If I am wrong, I sure will lose all my (paper) gain, and then some, but it won't be the end of the world. I am well diversified and should weather the pain, if it comes to that.


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## cannadian

PMREdmonton said:


> At this point I have a double with this stock.
> 
> However, I have decided to exit my position now at this stock price due to the risk of the Ford contract not being renewed. I would have liked to have had word by now and worry that the deal may have gotten bogged down. As they are now nearly totally dependent on this one contract for their future revenue I think the risk at this price point outweighs the benefit.
> 
> I could be wrong and a renewal could lead to a rapid 50% gain from the current stock price but there is a saying about pigs getting slaughtered. I have fed from this trough enough for now.
> 
> I may re-initiate a position during a stock correction. If you're a momentum trader then this trend still looks very positive. I just worry that on such a small nanocap with poor liquidity a stampede out of the stock on a deal failure could collapse the stock price to under 1.00 in just a few big morning trades at the opening whistle.


Congrats on a very solid play my friend!

I have decided to hold onto my shares as long as the price does not exceed ~$3.50 per share, my reasoning is as follows:

I believe that if the company doesn't get the Ford extension it can easily liquidate for $1.50 per share, so let's call $1.50 the downside price.

I also believe that if the company does get an extension of around 2-4 years that the stock price will easily hit $5 per share, so let's call $5 the upside price.

Therefore if the odds of AM getting this new contract are 50/50 the risk-reward ratio is favourable until the stock price reaches $3.25 per share.

The only problem is that I have no idea if the odds are 50/50 or not, and I also think that there is probably more upside than merely $5 if Ford upgrades their facilities and Oakville becomes a more powerful force in the automotive industry. I entered this stock because I was following Buffett's advice of rule #1 "lose no money" and now I am turning it into an odds game, so I'm fearful that I may be becoming greedy and just using rationalization to hold on...

That being said, my intuition tells me that 50/50 is probably a safe assumption, and if it is, then the odds are still in my favour to hold up until at least $3.25..

Man, this would've been a lot easier if the stock had stayed around $2 until they announced whether the contract was extended or not haha - I would've had all the upside with no downside.

I think from here on out I'll sell if it gets to 3.25 and then buy back if it drops to around 2.50 on no news, or buy back in quickly if they extend the contract and are trading below $4.50


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## AnimeEd

Trading halted at 1:00pm, pending news......


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## AnimeEd

bad news

http://www.marketwire.com/press-rel...ation-ford-contract-update-tsx-am-1790931.htm


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## HaroldCrump

> The financial impact of the closure is estimated to be an after tax loss of approximately $6 million with the majority of those costs expected to be recorded in 2013.


$6M is approx. 10% of the market cap of the company.
Expect a sell off tomorrow.

The bigger worry for current shareholders is : _Should Automodular be unsuccessful in these efforts, the Company will not have active operations following the closure of its Oakville facilities._


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## doctrine

I sold my 10000 shares at an average price of $2.975 back in Jan-Feb. Quite pleased with my performance but I didn't want to risk $30,000 once they didn't announce any new contracts after their wind parts one wound down. I'm interested if they get new business as they've done well in the past. The stock price will probably be a bloodbath though.


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## Ethan

Automodular currently has a market cap of $27 million, which is way less than the break-up value of the company. AutoModular's cash and AR alone are worth $29.3 million more than all liabilities. The market is basically valuing all of Automodular's future earnings at $0, their PPE at $0, their investments at $0, their prepaids at $0, their lawsuit with GM at $0, their cash at fair value and assuming that only 83% of their receivables will be collected. I realize there will be costs in breaking up the company, but Automodular also makes $15m/year. If the companies earnings over the next year are greater than the costs to shut down the company, then there is value at today's price.

I don't have the risk tolerance to get back into this stock at this price (I made a 30.5% return between August and January), but the current price seems too low to me. If the shares keep dropping, Automodular would become too good of a deal and I would get back in.


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## cannadian

Agreed. Glad I decided not to be too greedy and sold most of mine at 3.08 but if people continue to rush out of the stock and it dips to $1 over the next while I may just have to bet the ranch on it.


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## Toronto.gal

cannadian said:


> and it dips to $1 over the next while I may just have to bet the ranch on it.


And if it dips to $0 after that?

Congrats to all those that made profits!


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## Lucida

Wow down 50% today


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## phrenk

And that is why you don't buy a company's stock that is dependant on one provider, one contract. The company specific risk is tremendous and cannot be understated.

I'm surprised there was 15 pages on this speculative stock (which isn't covered by a single research analyst by the way).


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## nakedput

phrenk said:


> And that is why you don't buy a company's stock that is dependant on one provider, one contract. The company specific risk is tremendous and cannot be understated.
> 
> I'm surprised there was 15 pages on this speculative stock (which isn't covered by a single research analyst by the way).


wal-mart in its beginning stages was not covered by any analysts either. I'm not sure why this should really matter unless one is looking for excessive liquidity.


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## jamesbe

ouch that sucks. lucky for me I only invested $1000 originally. I was up a lot but now I'm down 36%.

Now I debate.... hold or cut my loses.


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## w0nger

What's the future for this company? When will we know if they are to succeed again? It's priced nicely for a speculative buy... maybe someone like Magna will buy them...?


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## londoncalling

I am grateful I sold half of my position as well... As a result I am still up on my original investment. Probably an example of why a stop loss is not a bad idea...


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## doctrine

To calculate fair value you have to go back to break-up value plus running out the Ford contract to 2014, plus a discount for 1 year of waiting. A napkin-type calculation based on my work 6-8 months ago would suggest around $2/share is what it is worth, so $1.60 might be fair value to give you a 20% gain over one year plus a small margin of error. However, I would definitely sell all if its trading at $1.55 like it closed today, as I suspect the market may price this below $1 before figuring out a fairer value.


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## GoldStone

londoncalling said:


> Probably an example of why a stop loss is not a bad idea...


Stop loss is useless when a stock gaps down from 2.97 to 1.28.

2.97 - last price before yesterday's halt
1.28 - today's open


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## Toronto.gal

londoncalling said:


> Probably an example of why a stop loss is not a bad idea...


As GS noted, not an effective nor automatic method to protect from massive losses/drop in price, as in such cases, the market price would have been nowhere near your stop price. Had you set your stop price @ $2 for example, it would not have helped in the least as the stock opened at $1.27.

This article, which I previously posted, explains it well:
http://www.theglobeandmail.com/glob...hen-stop-loss-orders-dont-work/article625413/

Those who trade/invest in such risky/small caps, which even pay a dividend [why the latter???] need to protect profits by recognizing when to sell, as well as controlling greed or optimism if you will [regarding the single contract renewal].

Glad that you did not suffer any losses!


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## londoncalling

point taken. I did not have a stop loss nor check to see where it opened yesterday. Instead I was both disappointed(that I still hold some shares) and grateful(that I locked in some profits) when I saw the closing price late last night after a 14 hour day. Anyone here still hold any shares?


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## cannadian

Toronto.gal said:


> And if it dips to $0 after that?
> 
> Congrats to all those that made profits!


I'll buy the whole company!



phrenk said:


> And that is why you don't buy a company's stock that is dependant on one provider, one contract. The company specific risk is tremendous and cannot be understated.
> 
> I'm surprised there was 15 pages on this speculative stock (which isn't covered by a single research analyst by the way).


I specifically seek out stocks that aren't covered by research analysts because that's where the real value is. 

A lot of guys here were buying this stock between $1.50 and $2.00 (I bought my position at $2). From the point of view of us there was virtually no downside risk - but tremendous upside potential if the contract was awarded.

Heads you lose 0-25%, tails you win 300%+ not a bad bet to make.

Sometimes bad companies and terrible situations (reliance on one customer etc) make fantastic investment choices based on the risk-reward.



doctrine said:


> To calculate fair value you have to go back to break-up value plus running out the Ford contract to 2014, plus a discount for 1 year of waiting. A napkin-type calculation based on my work 6-8 months ago would suggest around $2/share is what it is worth, so $1.60 might be fair value to give you a 20% gain over one year plus a small margin of error. However, I would definitely sell all if its trading at $1.55 like it closed today, as I suspect the market may price this below $1 before figuring out a fairer value.


Yeah I figure fair value is around 1.50 to 2.00 but I was able to get rid of my final bit of shares for 1.45 which was close enough for me. This stock seems like it has a decently high probability of being dead money, and there's also a chance management would bleed the company rather than liquidate it so because of these 2 reasons I'm demanding and especially high margin of safety before I move back in.

If I could jump in below $1 though that's where this thing really starts to look tasty again.


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## AnimeEd

cannadian said:


> A lot of guys here were buying this stock between $1.50 and $2.00 (I bought my position at $2). From the point of view of us there was virtually no downside risk - but tremendous upside potential if the contract was awarded.
> 
> Heads you lose 0-25%, tails you win 300%+ not a bad bet to make.


That is why I held on. Unfortunately it turned out poorly but still within expectation. I haven't done the calculations yet but I believe I break even if I sell at the current price.


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## GoldStone

cannadian said:


> there's also a chance management would bleed the company rather than liquidate it


You can bet they will try to milk it for as long as they can.


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## Yoqui

As I've said before I didn't like the risks as they delayed the announcement way too long which wasn't a good sign. Now that it's over and looking at it now I think this stock is a buy for few good reasons.
1. This company is known for paying huge dividends, meaning management doesn't have that all or nothing mentality and you can probably bet they will pay a huge dividend if they don't find anything to use it for
2. Quick small projects are profitable, as they did with the wind turbines. Management seems smart enough that they won't lose anything on new projects. 
3. How can it fundamentally get any worse? Sure the stock price can go down further, but its near impossible to lose what they currently have. This is not an resource exploration or a drug company, they can't bleed money that fast. 
4. Company is trading way below book value and still has 7 profitable quarters to go (or something like that)

I haven't been in this stock for a while, definitely going to keep an eye on this and hopefully I can get in near $1


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## DavidJD

Well, looks like we got burned on this one afterall. Peculiar that Ford wants to increase their production yet discontinuing their contract with AM. 

Merde. :chuncky:


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## doctrine

Although I'm out, I took a quick look at their last financial report. To put a value on the stock, they have about $1.35 in cash and are making roughly $0.15 a quarter. Their Ford contract was extended to the end of 2014 (originally mid-2014), giving them six full quarters. But their maximum cash is likely around $2.25 a share. Heck, even if I had all my 10,000 shares with an ACB around $2 from a year ago, I'd still be ahead with my $0.62 in dividends I would have received by now plus the $1.61 share price. I would never invest in AM now though, until I had an idea of what their future operations would be.


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## jamesbe

I'm still in. In a few more quarters I'll be ahead if their share price sticks to what it is now. So I'm going to hold for a bit, when I see black or green I'll cash out.

If it goes red, I'm not losing much.


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## Yoqui

Ya scratch that, not waiting for a another dip, bought a small position. The insider buying on this stock is very high.


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## jamesbe

On june 20th they announced they are closing up shop.

I'm not sure what that means as their stock has been rising since then.... Is there any business in the rest of their operations?


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## londoncalling

jamesbe said:


> On june 20th they announced they are closing up shop.
> 
> I'm not sure what that means as their stock has been rising since then.... Is there any business in the rest of their operations?


I still hold some of this. Made some decent profit and was hoping they could find some new avenues of business. Could you please post me a link saying doors are closing James?

Cheers


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## Spudd

http://www.insidehalton.com/news-st...g-back-jobs-automodular-set-to-close-in-2014/


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## londoncalling

Thanks Spudd. I was aware of the plant closures in June of 2014. How I interpreted James's post was that the entire company was closing its doors. Hence my alarm. Oddly enough this one continues to have insider buying and rise in share price from its initial hit. 

Cheers


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## londoncalling

finished at 1.83 today. still holding. Must be something in the works.


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## doctrine

I believe my analysis of $2.25 a share is still valid. That is cash, so they can write down their rest of their assets and still pay it out. At $1.83, it still gives a potential 23% return, plus perhaps they can squeeze some more profits out near the end through cost controls. 

Or, perhaps they do have some new contracts. Volume isn't high and there's no released news though. I wouldn't jump in now, because I don't see how they could possibly squeeze much more than 20-30% over the next 18 months.


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## explorer416

Spiked up to $2.10 just now! Increase of 10% in under an hour. Anyone know why? I can't find any recent news about it...


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## jamesbe

Damn, wish I would have noticed then, it's gone back down. I'm in the red on this one and I'm thinking of just selling it when it breaks even... getting close I think 2.10 would have been green for me.


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## londoncalling

I still have a 1/2 position that I am not sure what I will do with. I am up on both my current position plus took some off the table awhile back. It hit 2.19 today james. did you let it go? There has been 250k shares change hands over the past few days. I still hold to the valuation that was posted upthread. No guarantee it will get there but I will continue to hold as the management has always been good at achieving return for the shareholders


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## doctrine

At $2.10-$2.20, you're essentially betting operations will continue.. I'm certain there's not much more than $2.25-$2.50 a share left in assets when all is said and done, and you'll have to wait until the end of next year or later to see it.


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## Goose

Not really disagreeing with you doctrine. Just thought I'd put out that there is still the ongoing litigation with GM, I have no idea of their likely hood of their success, but this could add anywhere between 0 - 1.25 cash per share. (suing for $25M/~20M shares)


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## jamesbe

I got out yesterday during the high $2.15

Overall I sold for a loss but with the special dividend I made about $100 holding it for 6 months with an investment of $1000. So I did okay.


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## londoncalling

http://web.tmxmoney.com/news.php?qm_symbol=AM

Trimmed some more at $2.15. May dump the rest if share price holds after the next dividend.


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## londoncalling

just to update CMF. I still have a small position and glad I hold a bit yet as thy just announced a 10c special dividend in addition to its 6c quarterly to its shareholders. Selling/buying in tranches is bittersweet sometimes. For the most pat it is more sweet than sour for me on this stock. I have seen a lot returned to shareholders since I first purchased. It may be a bit of a gamble but I'd like to see this management team find another venue. They seem to be one of few companies that buy back shares on dips and gives extra cash back to its shareholders. I expect the price to recede after the ex div date but for now I will let the rest ride.


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## explorer416

I still have a bit of this... leftover from a partial fill of my sell order whenever I set that last year.

I noticed this release:


> AJAX: March 16, 2015:
> Automodular Corporation (“Automodular” or the “Company”) (TSX:AM) announced today that the Toronto Stock Exchange (the “TSX”) has commenced a review of the Company’s eligibility for continued listing pursuant to Part VII of The Toronto Stock Exchange Company Manual. Specifically, TSX is reviewing the Company with respect to the listing requirement that it must be actively engaged in ongoing business. The Company is being reviewed under the Remedial Review Process and has been granted 120 days to comply with all requirements for continued listing. If the Company cannot demonstrate that it meets all TSX requirements set out in Part VII of The Toronto Stock Exchange Company Manual on or before July 16, 2015, the Company’s securities will be delisted 30 days from such date. The Company will be entitled to make submissions prior to the decision of the Continued Listing Committee in mid-July 2015...


What happens to my shares if the thing gets de-listed?! It's currently sitting at $2.34. I've never rid a stock through to the shut-the-company-down-and-break-it-all-up process. What happens? I have so little of it left, that I'm tempted to hold on just to see what happens...


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## Eclectic12

They stay showing up on your broker report with no value.

If you decide to claim CL, make sure to write it off on your tax return within ten years.
http://www.theglobeandmail.com/glob...n-with-worthless-investments/article16397086/

http://www.milliondollarjourney.com/claiming-capital-loss-from-a-delisted-stock.htm


Cheers


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## londoncalling

Looks like I was smart (err.... lucky) to exit the remainder of my position on March 10th @ 2.28. It was the only stock I held that wasn't gyrating with the rest of the market. Also AM hadn't declared a dividend for awhile. The shareholder friendly vibe had dissipated. Seemed like a good time to raise some cash and do some portfolio spring cleaning. Have yet to reallocate those funds. Looking to buy some energy or financials with the proceeds. Guess will see what happens. GLTA that still have a position.

Cheers


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## londoncalling

now it's at 2.36. ended up picking allocating the money into WEF @1.81 (currently @ 1.91) and pays a 4% yield. So far so good. Mind you a month is not really a significant time frame. If I remember I will check in a year. I rarely watch a stock after I exit. 

Cheers


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