Chalk bag

Spartansaver - I agree with you. The strip isn't getting better and the move to vertically-integrate itself to tie to oil certainly didn't help. You would have to think while they are suffering, their competitors are literally going BK tho. This is a really a scale business and I'm seeing DAR being a waste management + value-added product hybrid. Commodities aside it seems like a pretty good business at troughy earnings to me. Probably goes to $7-8 before it goes to $30-40 in 3-5 years. Well, there we are. Quarter is coming up. No position. Anyone got additional insight?

Umm, Monster Hunter is a Capcom franchise. And here you go: My bad lol. Pokemon Go looks v. interesting! We'll see what they can bring. If this becomes reality and well-executed. The company will become the biggest franchise in world gaming, bars none. As a fan I really wish they could make it work. If I seem to swing between the 2 polar extremes -- it's because it's like watching someone with a good hand in poker screwing up.

Umm, Monster Hunter is a Capcom franchise. And here you go: My bad lol. Pokemon Go looks v. interesting! We'll see what they can bring.

I'll believe it when I see solid products. That nation / company had been behind on mobile for light years and it shows, and Nintendo specifically had been a dinosaur ever since they made the Wii. Handheld is no longer a major market and even console is a shaky proposition w/ the way the world is moving. The CEO who died was a genius for his time in the 80s-90s but a moron when it comes to coporate strategy going forward, while the whole board have no idea how to allocate capital and should all be fired. I call this company a typical Japanese zombie who rests on its past laurels and have no idea what the heck to do. Can you even imagine the cash flow they can monetize with a properly developed Pokemon / Monster Hunter on mobile? It pains me dearly. I don't call them idiots for no reason. Put that IP in the hands of any silicon valley company - even a startup, you got a freaking winner multiple times the success of that BS Zynga. And if they monetize games well globally, why can't they make movies / themeparks out of them? There you have Disney and an ever-lasting franchise. I'm telling you they really suck. Too bad they have neither vision, strategy, nor execution, and Japanese culture / corporate law basically kills the idea of any activists going after them. There's a price for this -- it's the implied # of hit products by the EV. Let's say EV is 10 Bn USD and we estimate every hit to be worth 2-3 Bn, then the implied # of hits = ~4. if you think they can do it, buy it, otherwise no. The cash pile isn't generating any returns and the management has proven its ability to light it on-fire over the past few years. I don't think I trust them. But then again, I'm just a nerd who loves games and in the investing business. What do I know about making games itself?

Donut = 0. although one is probably sweeter than the other =( Inefficient balance sheet as a large pile of debt and large pile of cash. With bond call some ring-fencing goes away but they are still stuck with a run-rate of 1.7-2 Bn interest in FY16. They also have 10 Bn of underfunded pension that I didn't mention. And why are they running with so much cash? ring-fencing is part of it but the massively negative working capital is key here. Fiat collects its trade receivables in 10 days. But it only pays its trade payables after 72 days. Even with 43 days of inventory on the balance sheet, it has negative working capital that amounts to almost E5bn. The supplier demands Fiat to hold enough cash just so they don't get screwed when time goes bad. If Fiat ever needs to cut production, it will hemorrhage cash. Marchionne has seen many cycles and knows that at some point – possibly soon – conditions will get tougher. While Brazil, APAC and Maserati are all going wrong – and Europe isn't contributing much either – FCA is fortunate to still have Chrysler as a profit engine. The move on Chrysler continues to look inspired and it is keeping the company afloat at present. Margins have surprised positively in 2015 and it is now making almost all of FCA's earnings. The problem here is that US dealer inventory as % of sales is at post-crisis high and ramping http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2016/01/20160108_autoinv.jpg I hate zerohedge with a passion but that's the most up-to-date I can find. It could be that everyone is prepping for a record selling season, but given Autonation's sizable miss and comments regarding new & used car margins & pricing, I think it's more like OEMs stuffing channels and building sizable over-capacity. The operating leverage of these auto OEMs is freaking massive, and when the cycle turns cash is going to bleed like a chicken getting its head chopped off. Not trying to fear-monger, of course, US unemployment + claims + inflation trends all look really good to me. But we know the cycle has decidedly turned for many EM countries and a lot of industrial / resource chains. The US consumer / service is about the only bright spot everyone is clinging to (including myself). It might as well work and we see 18 mm SAAR, but boy gotta be careful with a company like this especially at this part of the cycle. Of course, maybe Sergio could get a deal done. Unlike GM where you have muppets on the other hand super complacent with <10x PE (the ideal counterparty), Fiat is full of hedge funds and event folks who know they are playing with fire. Short squeeze can be pretty frequent and one can argue "risk-reward" does seem somewhat interesting -- makes shorting it very difficult. Personally not involved after getting out a few months after the relisting.

Look, it's balls-to-wall levered with a super inefficient balance sheet while spreads are blowing out, is betting its fortune on oil staying where it is, US SAAR is peaking w/ over-supply concerns -- leading to pricing & margin headwind while everyone is still adding capacity and stuffing channels, LatAm is a disaster (not their fault), China got a temporary boost but who knows what's going on there, CapEx intensity isn't going down (they always draw pies in the sky like this, think about the Alfa Romeo plan), and the squeezed the hell out of suppliers this year to get that FCF (It's a big working capital / funding boost). They have even debt maturity all the way to 2018 (uber-sensitive to refinancing market, better pray debt market doesn't close on them), and god knows when they are executing what's going to happen to EV + Autonomous driving, which I think all of these OEMs are woefully behind on despite recognizing the problem. Maybe Europe is a saving grace to some extent, and the shares aren't that expensive on a EV/EBITDA or PE basis, but you never never never buy these hypercyclicals on those numbers. This is a zero or hero trade and I see a ton of headwinds against them, let alone the long-term paradigm-shifting threat. If there is a gun to my head, I would rather bet on Fiat being a donut than a 20 dollar stock 3-4 years out. And this is coming from a guy who was bullish the name in early 2014. Skilled operators and silver-tongued negotiator being dealt a crap hand in a value-destructing industry. They are doing the best they can.

Good luck my friend.

I think Fiat is a short here. Pricing / margin is peakish, no FCF generation, and we are very close to late cycle. The company is sub-scale and too levered, and it might not survive the next crisis especially with the technological disruption happening in the auto space.

Spartansaver - I agree with you. The strip isn't getting better and the move to vertically-integrate itself to tie to oil certainly didn't help. You would have to think while they are suffering, their competitors are literally going BK tho. This is a really a scale business and I'm seeing DAR being a waste management + value-added product hybrid. Commodities aside it seems like a pretty good business at troughy earnings to me. Probably goes to $7-8 before it goes to $30-40 in 3-5 years.

Stock came off. Interest had been perking up. Had anyone been doing work on the name and want to discuss?

One thing I can't get my head around is that no body in the OEM industry likes them -- in particular GE, UTX, and Rolls. When you have free-loaders like Heico undercutting you 30-50% on your most profitable products you get pissed, and that's probably why everyone is pushing for the power-by-the-hour model. It sacrifices some margin I bet, but it should cut Heico out completely. Doesn't ramp in full-force until 2022 though I think. If my math serves me right they are now about 50% reliant on engines and looking to further diversify. I think they mentioned that the deal pipeline is good and I'm comfortable w/ the leverage they can take on. But it's never fun to be the public enemy. Also why can't the Chinese do what they do -- they are notoriously good at copy-cating things at very low prices? With that said, I probably still want to own just a little bit in case they do a smart transformative deal. Think it's bound to happen within 3 years but tough to underwrite.

Re your points on the presentation: It obviously isn't positive for the stock that the auto biz is low-ROIC and capital intensive with big ego leaders. But you seem think that there were investors who didn't know that? I don't see how this is a variant perception. I thought the presentation was good because it taught me things about the industry I did not know before and gave me a better understanding of the investment and possible outcomes. Managements assessment is that they need to invest every penny (and more) into capex to improve their competitive position and be a viable competitor in the future - and I agree. That's why they won't return capital or reduce leverage. You seem to view this as three separate issues, I see one cause and three effects. The leverage is at about 1xEBITDA. I wouldn't mind seeing it come down, but I don't think it is necessarily optimal to sit around with a net cash position of a third of your market cap either, like some of the competition. Do you think that a net debt position is unsustainable in auto manufacturing? On EV, txlaw made a comment on Twitter that I agree with - I think what you will see is partnerships. And btw, FCA have EV vehicles. How long do first mover advantages in tech usually last in the auto industry? Why he made the presentation? He wants to consolidate - the more people that know the benefits the more likely it is that something will happen. Whether it was directed to activists, other CEOs, analysts or regulators I will let other people decide. I don't see how it matters. The suggestion that Marchionne is trying to "talk up the stock to get himself paid" I think is half-way crazy. A more plausible explanation for his sometimes aggressive replies I think is that his temperament is naturally that way + the fact that he works 100 hours a week doing one of the arguably more stressful jobs on the planet. Thanks for raising the issues, always good to think about the other side of the argument. Guess this is what makes markets. Compounding, All fair points. - You would be surprised regarding ROIC vs. WACC haha. The fast money I speak to (and a lot of sell-side analysts to be honest) rarely do that kind of analysis. - Rather than saying a net debt position is unsustainable, I am sharing Sergio's frustration that they had to spend all these R&D that are necessary to survive, but are in essence unnecessary and duplicate. They have no choice but to do so JUST TO STAY WHERE THEY ARE-- and staying in cash they will die. So it's either die by doing nothing and hoarding cash, or by spending the dough and may have a chance (but implode in the next crisis that who knows when). I would take the gamble too, but many I speak with seems to be unaware of the risk associated with either of these actions. - Partnership / JV is not going to work. Even Sergio told you that. Apple decided not to "partner" because these Auto guys are too damn slow. Ultimately, his point (and the Bernstein analyst's point) is that all these CEOs are too stubborn to do anything together. I think you are right that, after seeing all the activism in the market, Sergio could believe that the involvement of activists will be a key agent of change. I am hopeful about that, but that is a tremendous uphill battle only pertaining to the most combative and non-compounding funds (i.e. since this is not a good business, guys like ValueAct likely won't get involved, but I could be wrong.) - Regarding the tech point, I'm sure we are aware that grounds are shifting beneath our feet. A whole host of technologies are developed by the "outsiders" from the auto industry -- be it driverless cars by Google, the unknown car project by Apple, electric vehicles by Tesla and BYD, car-sharing apps like Uber, or 4-5G + radio technology. A few things are important about them (and why they could be so harmful to the existing players): they are not only backed by players with massive capital support, shareholder bases with much less regard to profitability, but also based on entirely different mindsets and technological platforms. It's not another factory that GM can just build, it is massive R&D, talent, time in an entirely different vertical and systems. They may look like toys now (well, they really are), but that's what creative destruction really looks like. Once they become some sort of a real product, I think it will be waaaay too late to do any catch up. Is the 2 Bn Fiat spending on Powertrains really going to matter in the new world? No, it's wasted and so is the other $20 Bn spent by other players. I think that's what Sergio is scared about the most: they need to stop wasting duplicated dollars, and work together by embracing R&Ds that are really important. - Yeah, perhaps I'm too combative too on the pay package issue. Look what lack of sleep can do to you =). I'm glad he did this presentation like you did though.

Here you go. See attached. I don't know why people are spooked by the negative reaction. I liked the name since 8 bucks but at this price the valuation is quite ahead. Why is everyone so bullish on it? He told you there is massive duplicate R&D, he told you the ego in this industry is massive (himself included clearly), and he told you that they aren't gonna get anywhere close to WACC even in good times like this. How is this positive to the stock in any sense? And they are going to sink EVERY DOLLAR into CapEx until 2018 and investors won't see a single dime capital return -- while the company sports massive leverage -- and the worse thing is even with that it might not be enough. Fiat is going to go down 90%+ in the next crisis and will have existential issues when EV becomes competitive. Playing the cyclical is fine and we all do it, but this is not a good industry guys -- the stories are fascinating but, like Marchionne said, there really are better investments out there. The labor union note is interesting, but I wonder why he is laying this deck out there -- who is it directed to? It's great information and I'm glad he did it, but I can't help but think it serves a greater purpose. And the fight with the Bernstein analyst is kind of ridiculous. The call is a shit show really. But what do I know. If anyone has insights on the next steps would greatly appreciate. PS: Marchionne gets paid a lot. So I won't be surprised he is trying to talk up the stock / force a change in control to get himself paid. I respect the man for what he has done, but sometimes I find his aggression unnecessary (or perhaps he sees the dire future and is stressed out about it? That I can understand) Fiat_Chrysler_Automobiles_N.V._Q1_2015_Earnings_Call_Apr_29_2015.pdf

Glenn - thanks for your thoughts. Here is what I think so far: - When Sillerman slapped the Live Nation backbone together in the late 1990s, he had the illusion that owning the pipes, so to speak, gives him leverage against the artists. It turned out not to be the case. The good artists sit back, look at Sillerman paying all his fixed cost everyday, and demand a 90-10 split. Maybe the consolidation gives LYV leverage against the smaller guys, but I think it doesn't make the negotiation with the nameplate guys any easier -- in other words, scale is more like a necessity to start a conversation, and I completely agree with you that this is a commodity business. Now this joker is trying to do it again in SFXE, good luck to him -- I don't see another sucker like Clear Channel coming over the top anytime soon. - For Ticketmaster, I would note that it's not built by the internet guys (so the code probably sucks). The business model is very clever -- pay the venue and promoters so well up-front and share the profits, such that TM's positioning will always be at the top. This reminds me of the GDS vs. the airlines, where since the GDS pays the travel agents so well and the travel agents own all the corporate clients, the airlines had no choice but to pay GDS to route tickets. Same thing is happening here, the shared interest between the venues / promoters and TM is so strong that the renewal rate is > 100%. That's why they aren't getting disrupted by Dick and Harry at Silicon Valley, which I like. But I do see a "problem" with this aside from the clear benefits - the operating leverage simply isn't that big if you are sharing your profits, and that takes away a lot of the appeal. They don't disclose what the agreements look like, but I would imagine that's why this business's margin always hovers around 20% aside from the infrastructure problem they cite. They also don't give much info about their fixed tech cost base. - TM+ is a great concept. If they simply make the platform better and gain scale, I can easily see them crushing Stubhub... - What's everyone's view on Rapino? Also I think the IR leaves much to be desired.