EXO IM - Sohn Conference Foundation

Transcription

LOLLAPALOOZA
IraSohn– May4,2016
www.gwinvestors.com- @gwinvestors
Disclaimer
Thispresentationhasbeendistributedforinformationalpurposesonly. Neitherthe
informationnoranyopinionsexpressedconstitutearecommendationtobuyorsellthe
securitiesmentioned,ortoinvestinanyinvestmentproductorstrategyrelatedtosuch
securities. Itisnotintendedtoprovidepersonalinvestmentadvice,anditdoesnottake
intoaccountthespecificinvestmentobjectives,financialsituationorparticularneedsofany
personorentitythatmayreceivethispresentation. Personsreadingthispresentation
shouldseekprofessionalfinancialadviceregardingtheappropriatenessofinvestinginany
securitiesdiscussedinthisintroduction. Theauthor’sopinionsaresubjecttochange
withoutnotice. Forecasts,estimates,andcertaininformationcontainedhereinarebased
uponproprietaryresearch,andtheinformationusedinsuchprocesswasobtainedfrom
publiclyavailablesources. Informationcontainedhereinhasbeenobtainedfromsources
believedtobereliable,butsuchreliabilityisnotguaranteed. Investmentaccountsmanaged
byGreenWoodInvestorsLLCanditsaffiliateshavepositionsinthesecuritiesdiscussedin
thisintroduction. GreenWoodInvestorsLLCmayre-evaluateitsholdingsinsuchpositions
andsellorcovercertainpositionswithoutnotice. Nopartofthispresentationmaybe
reproducedinanyform,orreferredtoinanyotherpublication,withoutexpresswritten
permissionofGreenWoodInvestorsLLC.
Pastperformanceisnoguaranteeoffutureresults.
Ourportfolioconsistsofagreatteamofmanagers
guidingunder-appreciatedcompaniesthrough
transformationalmomentsintheirhistory.
Lollapalooza
Whatifyoucouldgetthis…
3GCapital
BerkshireHathaway
Markel
AthispreferredValuation
BenGraham
ForwardPE
26.6x
ForwardPE
32.8x
Price/Book
1.60x/160%
Price/Book
1.41x/141%
Obviouslythisisn’tpossible.
Source:Factset
CombingtheWorldForAnother…
EarlyCareerAbsolute Performance
450%
EarlyCareerRelativePerformance
250%
400%
200%
350%
300%
150%
250%
200%
100%
150%
100%
50%
50%
0%
Year0 Year1 Year2 Year3 Year4 Year5 Year6 Year7
0%
Year0 Year1 Year2 Year3 Year4 Year5 Year6 Year7
APriceBenGrahamWouldLove…
Price/NAV
0.65x/65%
Price/Book
1.41x/141%
PowerfulValueDrivers
Reinsurancecapital
Value-AddedInvestor
LessInvestorCompetition
ExceptionalManagementteams
Concentrated,Contrarian
ROICFocus
WhyDoesThisOpportunityExist?
0%
-5%
-10%
Italy
China
Japan
Finland
Switzerland
SriLanka
Belgium
Israel
Denmark
Portugal
Europe
Czech
Germany
Sweden
Austria
HongKong
Spain
Australia
France
Singapore
India
Malaysia
UK
Netherlands
Norway
Poland
Taiwan
SouthKorea
Philippines
USA
Pakistan
SouthAfrica
Indonesia
NewZealand
Canada
Mexico
Chile
Venezuela
Thailand
Egypt
Hungary
Argentina
Turkey
Russia
Brazil
WorstPerformingIndexintheWorldYTD
YTDStockMarketIndexPerformance
30%
25%
20%
15%
10%
5%
-15%
ConsumerConfidence@RecordHighs
125
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
120
115
110
105
100
95
90
85
Confidence(LH)
Unemployment(RH- Inverse)
11/1/15
1/1/15
3/1/14
5/1/13
7/1/12
9/1/11
11/1/10
1/1/10
3/1/09
5/1/08
7/1/07
9/1/06
11/1/05
1/1/05
3/1/04
5/1/03
7/1/02
9/1/01
11/1/00
1/1/00
3/1/99
5/1/98
7/1/97
9/1/96
11/1/95
1/1/95
80
Better
ItalianUnemployment&ConsumerConfidence
4.4%
Revenue
fromItaly
NowaSignificant DiscounttoNAV
€ 70.00
€ 65.00
€ 60.00
NAV(LH)
Discount(RH)
45.0%
40.0%
€ 55.00
35.0%
€ 50.00
€ 45.00
30.0%
€ 40.00
Stock(LH)
€ 35.00
€ 30.00
25.0%
20.0%
€ 25.00
€ 20.00
15.0%
FlashbacktoMarkel’sAlterraDeal
$1,000
2.0x
1.9x
$900
1.8x
StockPrice(LH)
$800
1.7x
1.6x
$700
1.5x
Price/Book(RH)
$600
1.4x
1.3x
1.2x
$500
1.1x
3/6/16
1/6/16
11/6/15
9/6/15
7/6/15
5/6/15
3/6/15
1/6/15
11/6/14
9/6/14
7/6/14
5/6/14
3/6/14
1/6/14
11/6/13
9/6/13
7/6/13
5/6/13
3/6/13
1/6/13
11/6/12
9/6/12
7/6/12
5/6/12
3/6/12
1.0x
1/6/12
$400
WeDon’tWanttheDiscounttoNarrow
€ 45.00
60%
NAVPer Share
€ 40.00
50%
€ 35.00
DiscounttoNAV(RH)
€ 30.00
40%
€ 25.00
30%
€ 20.00
StockPrice
€ 15.00
20%
RepurchaseVolume
€ 10.00
10%
€ 5.00
€ 0.00
1/1/13
0%
2/1/13
3/1/13
4/1/13
5/1/13
6/1/13
7/1/13
8/1/13
ConcentratedPrivateEquityPortfolio
NAV:€50.41
€14.98
€10.28
€7.36
Others €2.96
€26.05
Vs.
€32.80
(35%Discount)
NetDebt
€10.28
AllfiguresperEXOshare
HistoryofValue-AddManagement
160%
March2007– May2015
144.6%
140%
120%
100%
80%
60%
53.8%
40%
12.1%
20%
0%
Best-In-ClassUnderwriting
140.0%
130.0%
Berkshire
PartnerRe
MunichRe
EverestRe
SwissRe
HannoverRe
120.0%
Better
110.0%
100.0%
90.0%
80.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
20-YearPre-InvestmentCombinedRatio
98.9%
99.0%
98.9%
FreeCapital
ReasonablePricePaid
$9,000
$8,000
0.86x
$7,000
1.08x
$6,000
$5,000
$4,000
$3,000
$2,000
$1,000
$0
CashPaid
Tangible BookValue
ReserveRedundancies
CapitalLeavingIndustry
EstimatedGlobalReinsuranceCapacity
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2008
2009
2010
2011
2012
2013
2014
2015
2016
Lowerinterestratesmakefundingfromreinsurancepoliciesless
attractivetonon-coreplayers.
ACapitalJunkieinaMadWorld
CEO’sFocusMatters
200%
184.1%
150%
100%
71.2%
57.8%
50%
53.9%
36.6%
32.2%
28.9%
22.7%
0%
4.4%
-50%
-8.3%
-17.8%
-20.1%
Marchionne
Mulally
Toyoda
Zetsche
GhosnRenault
GhosnNissan
Winterko
rn
Mueller
Tavares
Fields
Barra
Krueger
6/04
9/06
6/09
1/06
5/05
6/01
1/07
9/15
3/14
7/14
1/14
5/15
ROIC
Global
Platform
Crisis
Mgmt
Restructuring
Global
Platform
Crisis
Mgmt
#1in
World
Crisis
Mgmt
Crisis
Mgmt
“Mobility
”
Product
Electric
AJunkieWhoNoOneBelieves…
FCA'sProjectedEBIT
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2015
2016
Estimates
2017
Plan
2018
WhoHasMissedAFewTargets…
CapitalRedirected
Investment:
2015FCF:
Fiatcashoutlay
(OurEstimates)
$3,718
$3,728
100%CashROIC
KeyDrivers
1. NewProduct
2. ReducedIncentivesonOldVehicles
3. CommoditiesSavings
4. BalanceSheetSavings
1.NewProduct– Next12Months
BaseCase
Volumes
BaseEBIT
Contribution
%of2015
EBIT
BearCase
Volumes
BearEBIT
Contribution
%of2015
EBIT
AlfaRomeoGiulia
76.6k
€361.7
7.1%
54.8k
€258.6
5.1%
MaseratiLevante
25.2k
€362.1
7.1%
11.2k
€161.5
3.2%
FiatToro(Brazilonly)
69.1k
€290.7
5.7%
30.3k
€127.7
2.5%
ChineseLocalJeeps
(Cherokee&Renegade)
190.0k
€323.3
6.3%
152.0k
€258.7
5.1%
FiatTipo
71.7k
€286.8
5.7%
43.5k
€152.3
3.0%
2016NewSegments
432.6k
€1,624.6
31.8%
291.8k
€958.8
18.8%
Model
€950-1600milliontailwind
2.ReducedIncentives
Model
Town&Country
JeepCompass/
Patriot
DodgeJourney
FiatPunto
Refreshing*
Q1-22016
2H2016
Mid2016
Q42016
Avg.MSRP
$35,471
$23,058
$26,828
£10,990
Current
Incentive
$4,500
$3,750
$2,875
£2,235
OldModel
€600-700milliontailwind
3.CommoditiesSavings
12/2014Value
12/2015Value
Change
$669
$432
-$237
$34
$19
-$14
Aluminum
$287
$236
-$51
Copper/Brass
$168
$126
-$42
Platinum
$128
$94
-$34
Rhodium
$18
$9
-$8
Palladium
$56
$40
-$17
Plastic
$260
$168
-$92
Rubber
$639
$457
-$182
Commoditiespervehicle
Steel
IronCastings
Total(pervehicle)
-$676
2015Volumes(millions)
4.16
TotalFleet-WideChange(millions)
>€700milliontailwindif25%PassThrough
-€2,833
4.BalanceSheetSavings
FCAHarmonizedBalanceSheet
25,000
NetDebt
Cash
20,000
15,000
10,000
5,000
0
2015
2016
2017
-5,000
-10,000
2,346
Interest
1,699Interest
1,229
~75%of2015EBITIncremental
BalanceSheetStrengthening
1.60x
NetLeverage
1.40x
1.20x
1.00x
0.80x
0.60x
0.40x
0.20x
Historical
Forecasted
0.00x
-0.20x
Investment-GradeRatingComing
RelativeFairValue
€ 40.00
€ 35.58
€ 35.00
€ 33.23
€ 30.00
€ 25.00
€ 21.00
€ 19.84
€ 20.00
€ 15.00
€ 10.00
Current
Price
€ 5.00
€ 0.00
AverageFordValuation
AverageGMValuation
2016
2017
AgriculturalCoiledSpring
Production<RetailDemand
CornStillBelowEconomicBreak-even
$9.00
CornPrice
$8.00
$7.00
$6.00
$5.00
$4.00
$3.00
BreakevenPrice
$2.00
$1.00
$0.00
Source:USDA
HeavyShortExposure
200,000
150,000
CBOTOpenInterest
CornPrice
9.00
8.00
7.00
100,000
6.00
50,000
5.00
0
6/16/06 6/16/07 6/16/08 6/16/09 6/16/10 6/16/11 6/16/12 6/16/13 6/16/14 6/16/15
-50,000
4.00
3.00
2.00
-100,000
1.00
-150,000
0.00
WindingUptheCoiledSpring
DaystoCoverShortInterest
10.6
27.7
11.6
SignificantOperatingLeverage
7.7%
31.2%
2015EBITMargin
IncrementalMargin
NormalizationDrivesSignificantUpside
$1,432
2015IndustrialEBIT
+$1,294
AgDemand
Normalization
IsFerrariaLuxuryCompany?
LimitedEditionsOutperformtheS&P500
25.0%
19.4%
20.0%
18.6%
15.9%
15.0%
10.0%
13.0%
11.9%
8.3%
7.6%
8.7%
6.5%
6.6%
6.1%
4.0%
5.0%
0.0%
250GTO
288GTO
F40
F50
Enzo
599GTO
EvenLookingattheWorstPerformer…
Whatotherproductsappreciate
invalueaftersale?
DemandRecession-Proof
40%
2008
29%
2009
18%
-6%
-21%
-30%
Bentley
Prada
LVMH
Ferrari
Hermes
-20%
Burberry
0%
-9%
Lamborghini*
3%
Porsche
7%
10%
Daimler
20%
-10%
Cumulative
BMW
30%
-32%
-40%
-41%
-50%
-60%
-59%
-70%
2015
Car
Deliveries
+6%
Incremental
EBIT
margin
76%
FCF>Double
€ 8.00
14.0%
€ 7.00
FCFpershare(LH)
€ 6.00
12.0%
FCFYield(RH)
€ 5.40
€ 5.17
€ 5.46
€ 5.00
€ 4.00
€ 2.00
8.0%
€ 3.65
€ 3.00
€ 1.89
€ 1.92
€ 1.92
10.0%
6.0%
€ 2.28
4.0%
€ 1.00
2.0%
€ 0.00
0.0%
12
13
14
15
16
17
18
19
CheapestInClass
30.0x
27.6x
15EBITDA
16EBITDA
17EBITDA
25.0x
20.0x
15.3x
15.0x
11.0x
8.8x
10.0x
8.9x
8.6x
8.3x
5.3x
5.0x
0.0x
Tesla
Hermes
ManU
Burberry
Prada
Richemont
LVMH
Ferrari
PuttingthePiecesTogether
ConcentratedPrivateEquityPortfolio
NAV:€50.41
€14.98
Vs.
€10.28
€7.36
Others €2.96
€32.80
€26.05
(35%Discount)
NetDebt
€10.28
NAVSettoTriple
NAV:€151.03
€26.05
€45.50
€72.00
€16.01
NetDebt
€10.28
Others €2.96
RightinEveryWay
Time
Strategy
Price
€ 70.00
45.0%
€ 65.00
Lowerscost
ofcapital
40.0%
€ 60.00
€ 55.00
35.0%
€ 50.00
€ 45.00
30.0%
€ 40.00
25.0%
€ 35.00
20.0%
€ 25.00
5/2/16
3/2/16
1/2/16
11/2/15
9/2/15
7/2/15
5/2/15
15.0%
3/2/15
3G-Style
Focus
€ 20.00
1/2/15
Areallcoiled
springs
€ 30.00
LearnfromOthers’Mistakes
20kClassABRKSharesSoldat~$35
SetitandForgetIt.

EXO IM - Sohn Conference Foundation

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