txlaw

Joel, I for one think you're actually kind of an ass---- ...

I kind of get the feeling that this is all smoke and mirrors, and Marchionne is really angling for someone else to get involved with FCA. VW would be a great fit, for example. Maybe Marchionne can convince Piech, who just left the board, to stir up some trouble. Regardless, I agree that this is good for GM shareholders. ;D

You're referring to the bonus depreciation that got put in during the crisis, no? Yes, that almost certainly has had some effect on NA sales -- and not just in the ag equipment sector. But I don't think that's the overarching reason for a downturn in sales. I really do think it's because we're on the down-cycle for agriculture. Now is the time that ag equipment companies have to get more efficient and where consolidation ought to be occurring. I've looked at DE, CNHI, and AGCO. I think all are very interesting for various reasons. DE -- Best of breed. Will inevitably get stronger in the downturn. Focus on technology means potential growth in asset-lite business area. CNHI -- A big dog that could be a best of breed company if management can drive efficiency gains (e.g., with WCM efforts) and be a consolidator. It doesn't hurt that Sergio Marchionne and Exor are involved with this one. AGCO -- Pretty well run but small player that could easily be folded into a bigger manufacturing concern. Great partnerships with TAFE and Rabobank, which are IMO best of breed companies in the ag sector.

And speaking of mechanization: http://www.washingtonpost.com/blogs/the-switch/wp/2015/06/22/google-didnt-lead-the-self-driving-vehicle-revolution-john-deere-did/

I don't think it's about a farm bubble as much as it is about the reversal of the agricultural equipment cycle. For years, farmers have been stocking up on ag equipment while the agricultural commodities pricing cycle was on the upswing. Now, the user base is going to be buying much less ag equipment on an annual rate, except perhaps in emerging markets. And if poor global macro conditions persist, emerging markets won't be the saving grace for these heavy manufacturing companies. I believe the DE price war article is from over 4 years ago. Agco has actually been increasing prices to offset the downturn in units sold for a while now, even in the face of reduced pricing by some of its competitors. While I don't think it's at all right to say there is a price war going on, or that Agco is a price taker, it is definitely worth keeping an eye on whether they can increase prices at all for the next few quarters. Regarding small farm equipment vs. large farm equipment, I think that your future of the equipment industry comment has a view that's biased towards developed markets, where consolidation continues to occur in the ag space. Small farms aren't going away anytime soon, and mechanization will continue across the board. Indeed, if you look at TAFE sales, you will exactly this phenomenon. Finally, no opinion on GSEs or other ag-related businesses.

Thanks for posting. While obviously a positive development, I'm not sure where activism leads with AGCO. Although I think the company is undervalued, I can't put my head around who the buyer might be. I agree completely that consolidation makes sense for the industry as a whole but I'm not sure how attractive AGCO is to their competitors. For some, AGCO would provide an easier entrance into more international markets and I certainly think this would be attractive. Also, I can also see a scenario where AGCO sells off a brand or two to a competitor in an effort to rationalize the operations and focus on what might be considered the more core brands. The current share repurchase authorization certainly shows that management thinks the company is significantly undervalued by the market. TAFE's involvement also indicates that they see upside to AGCO in India. I've liked AGCO for a while and originally bought in when the stock fell back into the mid $40s in 2014. On a normalized earnings basis, I think AGCO is worth $75+/share (using today's share count), and in a strategic sale, I can see a value north of $90/share (again normalizing earnings). However, I am in the wait and see camp on whether activism will accomplish anything. I really like AGCO's management. I think they continue to be good stewards of capital given the hand they have been dealt recently. My guess is that Blue Harbour's discussions and activism will just move any catalysts along a little faster than would otherwise be the case. I look forward to seeing how this turns out. I think there's plenty of potential buyers -- or possibly targets -- within the ag equipment space. But I also could see a heavy industrial conglomerate getting into the picture as well. You could just take a look at the CNH roadshow (when CNH merged with Fiat Industrial) to get an inkling of the possibilities. Selling brands doesn't make sense, IMO. It would actually be counterproductive to have less scale here.

Blue Harbour -- guys who are known as quiet activists similar to Valueact -- just filed a 13D on Agco. My guess is they will talk to the company about plans for consolidation going forward. The fact of the matter is that scale matters hugely in this business. Operating margins are directly proportionate to unit sales. Guys like Deere, CNH, and Kubota make double digit operating margins, while Agco and Claas make mid single digit operating margins that continue to trend downward to the mids. I think M&A makes so much sense in this sector, just like it does in the auto sector. Heavy manufacturing has too many duplicative costs worldwide, and the bigger players are best positioned to take these costs out.

Dish Network is in talks to merge with T-Mobile US http://online.wsj.com/news/articles/SB12371204595962174427904581026503093402830 Was just about to post this. You beat me to the punch!

Singaporean sovereign wealth fund and Montreal pension funds just bought a bunch of stock, btw. Related to the equity injection discussed above.

Ah, yes. I remember talking about XPO on the board at some point: http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/the-400-man!/msg105236/#msg105236 I never did get around to looking into it in depth. Damn. Note to self: If you see Peter Lynch getting involved in a name, you better damn well do some in depth research on it!

Thanks for posting.

Yeah, combination of positive sequential sales trends, better cash flow, and lower borrowings indicates that SHOS may navigate 2015 without burning cash for the year, which makes the net-net situation a pretty good one for investors. Not surprised that it's up so much on the disclosure.

A must read on Sergio: http://www.nytimes.com/2015/05/24/business/detroits-chief-instigator.html Interesting tidbit from the article -- Marchionne sent an email to Barra in March suggesting a merger.

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They're sitting on close to $3 billion, so the 12 million annual buyback won't really put a dent in their investment activities at all. I don't think this announcement is that big of a deal, except that it indicates that BBRY has finally stabilized to where they will generate positive FCF before growth investments.