Here’s an Interesting and Fun Way to Play Stellantis
If you’re a Jeep lover, as I am, you might have contemplated buying some shares in the SUV powerhouse’s parent at one time or another. It’s had many over the years. The latest is Amsterdam-based Stellantis (STLA), the result of a January 2021 merger between Fiat Chrysler Automobiles and PSA Group, the parent of Peugeot, a French auto manufacturer.
Today, Stellantis generates 149.4 billion Euros ($152.3 billion) in trailing 12-month revenue with an EBITDA profit of 20.8 billion Euros ($21.2 billion). While it pales compared to some of the world’s largest car and truck manufacturers, the merger has given Jeep even more power because of its important place in the entire Stellantis ecosystem.
Arguments can be made for and against owning STLA stock. As a current and past Jeep owner, I assume STLA is a buy, down 40% year-to-date. Instead, I’ll explain why investors might consider Exor NV (EXXRF) for betting on Jeep and Stellantis.
Exor Is Stellantis’ Largest Shareholder
Exor is the holding company for Italy’s Agnelli family, one of the wealthiest families in Italy. It owns 52% of Exor’s shares. In terms of voting power, Giovanni Agnelli B.V. holds 85.4% of the voting rights. Exor, in turn, owns 14.4% of Stellantis, making it the largest shareholder.
The beauty of buying Exor shares is that you get a piece of an important Stellantis shareholder without being overly exposed to one company. The downside is you have to accept that the Agnelli family controls Exor. Your votes are meaningless.
If you can accept that a long-term plan of buying Exor shares when they’re trading under $60 makes sense. They’ve traded under $60 on two occasions since 2017: December 2018 and March 2020. It’s now selling for under $60 for the third time. It remains to be seen if the shares fall further -- down 35% YTD -- or if they bounce back into the $60s.
Either way, a buy in the $50s should turn out well in 3-5 years.
So Many Other Assets
While Stellantis is probably considered the crown jewel of Exor, its sexiest has got to be its 22.9% ownership of Ferrari (RACE) -- 36% of the voting rights -- which went public in October 2015 at $52 a share.
In 2021, Ferrari had 4.3 billion Euros ($4.4 billion) in revenue from the shipment of 11,155 cars to more than 60 markets worldwide. Enzo Ferrari founded the company in 1929. In 1969, Ferrari partnered with the Agnellis to grow the company.
Who wouldn’t want to own a Ferrari?
Do you like soccer or football as most of the world calls it? Exor holds 63.8% of the economic and voting rights of the Juventus Football Club. Listed on the Milan Stock Exchange, it has more than 100 years of history as an iconic football club.
The Chelsea Football Club recently sold for $5.2 billion. There’s plenty of money to be made from sports ownership.
If you like reading business publications, The Economist is one of the best. Exor owns 43.4% of the equity and 20% of the voting rights. In 2021, it accounted for 1.1% of the holding company’s gross asset value (GAV).
Lastly, Exor owns 24% of Christian Louboutin for women reading this, the French maker of women’s shoes with the signature red sole. It’s also gotten into men’s footwear and other goods.
I encourage you to look closely at this exciting holding company.
The Valuation Perspective
Exor’s current market cap is 13.5 billion Euros ($13.8 billion). It currently trades at 0.77x its book value. It hasn’t had this low a valuation since 2016. By comparison, two U.S. conglomerates: Berkshire Hathaway (BRK.B) and Loews (L), have P/B multiples of 1.2x and 0.87x, respectively.
I view Exor the same way I do Warren Buffett’s holding company: When the day comes, and the business’s assets are liquidated in an orderly and value-seeking manner, both of these great companies will be valued far more dearly than today.
That is to say; they are both worth far more than their current price-to-book multiples. However, we won’t know until it happens. Until then, it’s all conjecture.
In the meantime, getting back to the original premise of buying Exor to gain exposure to Stellantis, I believe that the company’s push into electric vehicles will add value for shareholders over the long haul.
In 2021, the highest-selling plug-in hybrid in America was the Jeep Wrangler. However, not many investors probably know that. Stellantis sold more than six million vehicles in 2021 through Jeep, Ram, Fiat, Alfa Romeo, Maserati, and Peugeot. It’s no small potatoes.
In 2023, Jeep will introduce a fully-electric Jeep to the U.S. market. A year later, it will launch a Dodge muscle car. By 2026, all its new vehicles in Europe will be battery-electric.
While a lot is happening as the company transforms itself, it remains behind its Big Three competitors. That said, like a hard-charging, come-from-behind Kentucky Derby winner, its story has yet to be entirely written.
I see STLA as a good value play for aggressive investors at current prices. Everyone else might want to consider Exor because its diversification and conglomerate discount is higher than it’s been in some time.
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