Opinions Paul Harris, CFA
Volkswagen AGVOW.DEBUYOct 03, 2013
Paul Harris, CFAStock price when the opinion was issued
As of Aug 29, 2024. Market Open.
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Not a huge fan. Reasonably well managed. Slowdown in EV buying, just as it's been ramping up its EV production. The field is getting crowded, and Chinese makers have the cost advantage. These factories take so many 10s of billions of dollars of investment, so if you don't get demand in a reasonable time, EPS suffers.
Auto companies haven't been great investments over the long haul.
He's buying this week's dip. These shares fell to $30, which is obscene compared to other carmakers. Overall, FedEx and Nike are talking about supply chain issues which he hears is worsening, not improving, as rising wages will narrow margins. So, he will likely return to high cash levels.
He is not a big fan of car companies because they don't generate much free cash flow. Cap X is very high. He would prefers LFUS-Q. It makes all the fuses that go into electric vehicles.
He wouldn't invest in any automotive company, because we are already running ASAR (a seasonally adjusted rate of production) in the US of 16 or 17 million vehicles. Your best-case scenario to get to 18 million vehicles is extremely limited. We’ve also seen producers do a lot of subprime financing in order to place cars, which implies they have had to scrape the bottom of the barrel to find demand.
Had a long, drawn-out process when they were trying to buy Porsche. Thinks the lawsuit is still out there but generally they own it and it is part of their business. This is a very important part as it has very high margins. Not expensive at 6.7X earnings with a 3.5% yield. Have lots of cash in the balance sheet, part of which will be used to help buy out some of the positions they don’t own. Very small market share in the US of about 5.1%, which they should try to increase. Europe has been a very difficult environment for them. Good story.