muscleman Posted January 3, 2014 Share Posted January 3, 2014 to all other Longs in Fiat. what do you are thinking about the possibilty for a ferrari spinoff after the probably fiat listing in new York this year? Segio said he would spin off Ferrari in a nightmare scenario. So clearly no need to do so now. Link to comment Share on other sites More sharing options...
racemize Posted January 3, 2014 Share Posted January 3, 2014 Hey guys great thread thanks for all the work. I had a question regarding the EV and specifically the Net Debt & Pension calculation. Referring to this writeup: http://www.gwinvestors.com/Main/Blog/Entries/2013/5/2_Fiat_SpA_(F_IM)__The_Bottom.html This article really helped me understand the upside for this situation, however in table 3 the author lists Net Debt & Pension at 16.3B euro. It was written in May of 2013 at which time the Q1 consolidated statement read 29B debt, 11.7 in Employee Benefits minus 18.8B Cash and Current Investments which nets to 21.9B. This is obviously materially off from 16.3. In the latest filings, the numbers are 29B debt, 10.4B employee benefits minus 16.8B Cash which nets 22.6. What am I missing from my calculation? Thanks! Q1 report has net debt as: 9 billion (page 50) Then employee benefits provision is 6.8 billion (page 18) Totals to: 15.8 billion. Q3 report has net debt as: 11.4 billion (page 22) Then employee benefits provision is: 10.4 billion (page 26) Totals to: 21.8 billion There were comments that the Q3 numbers were seasonal in the call. Net debt will be affected by the cash payments too. Link to comment Share on other sites More sharing options...
argonaut Posted January 4, 2014 Share Posted January 4, 2014 Barron's article today: Chrysler in Tow, Fiat Can Now Burn Rubber http://on.barrons.com/1bFt1Dy You may need a subscription to read it. Link to comment Share on other sites More sharing options...
Guest hellsten Posted January 5, 2014 Share Posted January 5, 2014 Barron's article today: Chrysler in Tow, Fiat Can Now Burn Rubber http://on.barrons.com/1bFt1Dy You may need a subscription to read it. Fiat shares (ticker: F.Italy) could double in value in a couple of years. The stock defied most analysts' expectations in 2013, and could do so again in 2014. Fiat looks pricey based on conventional metrics, but they are misleading. Morningstar analysts David Whiston and Richard Hilgert argue that applying a multiple of enterprise value to the coming year's estimated earnings before interest, taxes, depreciation, and amortization—the preferred valuation method for auto companies—irrationally discounts the value of Fiat's assets. Instead they rely on a depreciated cash-flow model that takes into account increased risks for investors, such as the higher cost of equity and debt. They seem to be onto something. In 2013, when most analysts were bearish on the stock, they were bullish. Fiat's Milan-listed shares gained 57% last year. Whiston and Hilgert estimate Fiat's fair value at 14 euros ($19.04) per share, more than double Friday's closing price of €6.76. A consensus of analysts' estimates yields a price target of €5.42, about 20% below the latest price. "The market just doesn't get it," says Hilgert. "Fiat stock currently trades at a very compelling valuation." Fiat burned rubber last week, racing ahead 16% after the Turin-based company announced it had agreed to buy, for $4.35 billion, the 41.5% stake in Chrysler it didn't already own. Following the run-up in price, the stock trades for 15.6 times estimated 2014 earnings of 44 European cents per share. The auto maker is thought to have earned €0.18 in 2013 on projected revenue of €87 billion. The Chrysler deal was expected, but the timing and favorable terms were a pleasant surprise, and enhanced the reputation of Fiat Chief Executive Sergio Marchionne for savvy dealmaking. Half the initial outlay of $3.65 billion comes from Chrysler's own coffers, so the increased debt associated with the deal—initially, $1.9 billion—isn't as burdensome as feared. Fiat's debt is expected to peak at about €22 billion next year. Due to a projected increase in cash flow, the ratio of adjusted net debt to earnings before interest, tax, depreciation, amortization, and restructuring costs could drop to 3.6 in 2015 from 3.8 in 2012. Link to comment Share on other sites More sharing options...
leftcoast Posted January 5, 2014 Share Posted January 5, 2014 New video blog entry from Greenwood Investors, with updated thesis following Chrysler deal. Fiat SpA (F IM): The Two Year Honeymoon http://www.gwinvestors.com/Main/Blog/Entries/2014/1/4_F_IM_.html We are pleased to present out basic thesis on Fiat in this 15 minute youtube video. Link to comment Share on other sites More sharing options...
LC Posted January 5, 2014 Author Share Posted January 5, 2014 I'm a little late on this idea. Just starting the diligence. Had a question for board members. What is the equivalent to the 10K when researching FIATY? The reason I ask is that in the US, the 10K and annual report are different. One can be a marketing document without all the relevant details. I found the annual report on Fiaty's website. I just want to make sure there isn't another place I should look. 20F I believe. LC, Thanks. I couldn't find the 20F for 2012 on the Fiat website. All I find is the annual report. Ah sorry...I don't think they are required to file a 20F anymore as they are not listed on the NYSE. Only the ADR is. So I believe it is just the annual report and the mid-year (transitional?) report. But their I/R page has regular information releases that are more current as well. Link to comment Share on other sites More sharing options...
phil_Buffett Posted January 5, 2014 Share Posted January 5, 2014 New video blog entry from Greenwood Investors, with updated thesis following Chrysler deal. Fiat SpA (F IM): The Two Year Honeymoon http://www.gwinvestors.com/Main/Blog/Entries/2014/1/4_F_IM_.html We are pleased to present out basic thesis on Fiat in this 15 minute youtube video. what a nice Video!!!! very nice :) :) :) :) Link to comment Share on other sites More sharing options...
frommi Posted January 5, 2014 Share Posted January 5, 2014 At first congratulation for everybody involved in FIAT. That was really a great deal and faster than expected. It was on my too-hard pile and stays there, but i want to learn more. Since this is a cyclical business, how do you know when the cycle starts/ends? Given what i read before its common that cyclical stocks look cheap at the top and expensive at the bottom, is it something else with FIAT or am i wrong that this is a cyclical business or what am i missing here? Whats the exit plan for your investment in FIAT, or is there none? (Hold forever?) Link to comment Share on other sites More sharing options...
Packer16 Posted January 5, 2014 Share Posted January 5, 2014 The way I look at Fiat and GM is via the car purchasing cycle and pent-up demand. Peter Lynch has a great description of this in his "Beating the Street" book in Chapter 15. Car demand has essentially grown slowly over time but is cyclical over time. Before 2008, there was an oversupply but since then there has been 2008/2009 which reduced demand temporarily and physically destroyed inventory (cash for clunkers). By my calcs, we still have some pent-up demand to supply. This may flip in the next few years. In this case the most levered play would go up the most but you also need excellent management which you have. If Fiat jumped to the high teens to low 20s, I would seriously consider selling. Other data points are Morningstar's analysis and Greenwood's case. Packer Link to comment Share on other sites More sharing options...
frommi Posted January 5, 2014 Share Posted January 5, 2014 Ist it possible to predict economic cycles by inventory numbers? Doesn`t this mean we have an independend stock market indicator, because car sales drops are often aligned with recessions? Out of the latest news: GM and Ford sales disappoint in December Isn`t this a first warning sign? Link to comment Share on other sites More sharing options...
steph Posted January 5, 2014 Share Posted January 5, 2014 Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. Link to comment Share on other sites More sharing options...
Packer16 Posted January 5, 2014 Share Posted January 5, 2014 Pent-up demand is the key variable. LT demand changes slowly over time. Folks have to buy cars to move around and eventually they wear out. The pent-up demand concept captures the LT underlying fundamentals while inventory reflects the shorter picture. The headlines you show are a short term correction in a longer term demand recovery. If the same headline occurs 3 years from now and production has been above LT trend for 3 years then there is a concern. Right now we are right at LT trend production with a number of year of below LT trend production. Packer Link to comment Share on other sites More sharing options...
jay21 Posted January 5, 2014 Share Posted January 5, 2014 There are a few different reasons why I think revenue and earnings will continue to increase (i.e. this is not a bottom): - pent up demand and high average age of autos - low housing starts, more starts means more pickups - Recession in Europe, but who knows when this will turn - Expanding middle classes worldwide. There will be a lot more autos in the world in the next few decades Link to comment Share on other sites More sharing options...
merkhet Posted January 5, 2014 Share Posted January 5, 2014 Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. I'm not sure anyone should rely on track records to influence perceptions of analysis. The analysis should probably rest on its own -- FWIW, I think their analysis is pretty good. Link to comment Share on other sites More sharing options...
plato1976 Posted January 5, 2014 Share Posted January 5, 2014 btw: their hedge didn't perform well Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. I'm not sure anyone should rely on track records to influence perceptions of analysis. The analysis should probably rest on its own -- FWIW, I think their analysis is pretty good. Link to comment Share on other sites More sharing options...
bmichaud Posted January 5, 2014 Share Posted January 5, 2014 Haven't looked at their track record, but if their fiat analysis is anything like their 2008 Ford thesis, then it's pretty solid. Link to comment Share on other sites More sharing options...
steph Posted January 5, 2014 Share Posted January 5, 2014 Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. I'm not sure anyone should rely on track records to influence perceptions of analysis. The analysis should probably rest on its own -- FWIW, I think their analysis is pretty good. Investing is more art than science. The track record of a person is therefore essential. I have seen too many brilliantly written and documented reports which turned out to be lousy investment ideas. My personal knowledge about the car industry is limited so I cannot judge if this analysis (which seems very good) is complete or if some important facts are omitted. I therefore have to rely on past performance of the author. Link to comment Share on other sites More sharing options...
merkhet Posted January 5, 2014 Share Posted January 5, 2014 btw: their hedge didn't perform well Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. I'm not sure anyone should rely on track records to influence perceptions of analysis. The analysis should probably rest on its own -- FWIW, I think their analysis is pretty good. Hedge? Nice video from Greenwood, but I went to their website and was not really impressed by their track record. So I am not so sure if their analysis is of great value. I'm not sure anyone should rely on track records to influence perceptions of analysis. The analysis should probably rest on its own -- FWIW, I think their analysis is pretty good. Investing is more art than science. The track record of a person is therefore essential. I have seen too many brilliantly written and documented reports which turned out to be lousy investment ideas. My personal knowledge about the car industry is limited so I cannot judge if this analysis (which seems very good) is complete or if some important facts are omitted. I therefore have to rely on past performance of the author. There is some danger in this as it would have, at one point, given weight to Bill Miller at a time when you really shouldn't have given his analysis much weight -- so the problem actually cuts both ways. In any case, if I'm reading you right, it's possible that you're saying that the auto industry is currently outside of your circle of competence -- in which case, you probably shouldn't follow anyone (regardless of their track record) into an investment in the industry. Link to comment Share on other sites More sharing options...
steph Posted January 5, 2014 Share Posted January 5, 2014 There is some danger in this as it would have, at one point, given weight to Bill Miller at a time when you really shouldn't have given his analysis much weight -- so the problem actually cuts both ways. In any case, if I'm reading you right, it's possible that you're saying that the auto industry is currently outside of your circle of competence -- in which case, you probably shouldn't follow anyone (regardless of their track record) into an investment in the industry. You are completely right! But I like this Fiat situation and am trying to learn more from all the interesting comments on this board. I just give less weight to those who have unconfirmed track records and more weight to those who have proven to be excellent....... Link to comment Share on other sites More sharing options...
merkhet Posted January 5, 2014 Share Posted January 5, 2014 I would say that if you read through both the GM and the Fiat threads in their entirety, you could probably get a pretty good sense of the automotive industry. Read Einhorn's thesis on General Motors from 2010/2011 and read Hayman Capital's presentation on General Motors. Then take a look at all of Greenwood's writings on Fiat. Then go through the last few years' conference call transcripts for GM, Ford & Fiat. That should put you in a pretty decent position to determine whether you understand the industry enough to make an investment in Fiat. Link to comment Share on other sites More sharing options...
Spekulatius Posted January 5, 2014 Share Posted January 5, 2014 Unless I am missing something FIATY trades at a premium to BMW (in particular if you compare the preferred shares BMW3.DE) for most valuation metrics. Why pay a premium for a far inferior business. FWIW, in terms if automobile profits, besides the volume angle, the pricing angle is very important (although both go hand in hand to some extend). During the last 3 years, price discounts were fairly small in the US, but there is no reason why they may not get much larger again, if the business becomes more competitive. Link to comment Share on other sites More sharing options...
Packer16 Posted January 5, 2014 Share Posted January 5, 2014 If you look at the numbers for the Hyman presentation before the Chrysler deal you will see Fiat is cheaper and after the deal it is more so. It the preferred sell at discount, then it is cheaper but probably at peak margins. I think the story behind Fiat is that they are not a peak margins and thus can improve going forward. BTW the Hyundai preferreds are even cheaper yet at less than 1x EBITDA. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted January 5, 2014 Share Posted January 5, 2014 Amazing, I thought the Hyundai preferred appreciated quite a lot last year - amazing it's still trading less than 1x EBITDA If you look at the numbers for the Hyman presentation before the Chrysler deal you will see Fiat is cheaper and after the deal it is more so. It the preferred sell at discount, then it is cheaper but probably at peak margins. I think the story behind Fiat is that they are not a peak margins and thus can improve going forward. BTW the Hyundai preferreds are even cheaper yet at less than 1x EBITDA. Packer Link to comment Share on other sites More sharing options...
Packer16 Posted January 5, 2014 Share Posted January 5, 2014 It did but Hyundai has alot of non-operating assets. Before the appreciation it was probably a net-net. Packer Link to comment Share on other sites More sharing options...
plato1976 Posted January 5, 2014 Share Posted January 5, 2014 If you look at its price in 2009, you will wonder if this was one of the cheapest big cap stock EVER in history... the price was 10% of the current price I don't think Hyundai had a debt crisis in 2009 but I could be wrong I wish next time I could grasp such an opp It did but Hyundai has alot of non-operating assets. Before the appreciation it was probably a net-net. Packer Link to comment Share on other sites More sharing options...
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