Fiat Chrysler Automobiles NV (NYSE:FCAU) delivered a solid performance in 2017, with the company’s stock gaining more than 95%. Greenhaven Road Capital, one of the top performing hedge funds in 2017, remains bullish on Fiat Chrysler, expecting more growth this year. In its Q4 Investor Letter (you can download a copy here), the fund discussed Fiat Chrysler and other companies. In this article, we’re going to focus on the fund’s comments on Fiat Chrysler.
Talking about Fiat Chrysler – its largest position – the Greenhaven said that it still sees a value in FCA shares because “a lot of good news is likely in store for the company this year.” Here is everything that the fund said:
In 2018, it is likely that the company will spin off its parts business, revealing the underlying value, reducing gross debt, and becoming net cash positive. Further, we should see operating leverage as earnings continue to improve after a multi-year period of investment. The company just announced earnings today and provided guidance for 2018. The shares trade for less than €20, yet guided to over €4 of cash flow for the year and ended the year with net cash of more than €2. At current prices we will end the year with a greater than 20% FCF yield, which leaves a lot of room for multiple expansion for a company that will benefit from tax reform, substantially reduce its gross debt, and have new product and product mix tailwinds. Keep in mind, 2018 will be Sergio Marchionne’s last year as CEO and the automobile industry has several negative attributes, including high-capital intensity, cyclicality, high fixed costs, low returns on invested capital, and product obsolescence. It is unlikely that we will be owners forever, but since a lot of good news is likely in store for the company this year, it remains our largest position.
Fiat Chrysler Automobiles (NYSE:FCAU) is a giant auto firm that is listed on the New York Stock Exchange (FCAU) and Borsa Italiana in Milan (FCA). Exor S.p.A, an Italian investment group controlled by the Agnelli family, has a 29.19% ownership in the world’s seventh-largest automaker.
Shares of Fiat Chrysler are up more than 25% since the beginning of the year. Over the last 12 months, the share price has surged more than 97%. The stock has a consensus average rating of Overweight and average target price of $20.49 from analysts polled by FactSet. Shares were closed at $22.39 on Friday.
Meanwhile, Fiat Chrysler Automobiles (NYSE:FCAU) isn’t a very popular stock among hedge funds tracked by Insider Monkey. As of the end of September 2017, there were 29 funds in our database holding shares of the automaker, including Mohnish Pabrai, SRS Investment Management, and Raging Capital Management.