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Volkswagen ADR

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May 11, 2014
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atomiton wrote: Still worth it at $37.13?
Longer term, i think so. Volkswagen has a relatively larger discount compared to peers. They have a huge cash generating power, and for the most part, their lawsuits and settlements are accounted for. Yes, they are going to have to have larger expenditures if they are planning to invest in all-electric, but this is the same for all car markers regardless. Unlike Tesla, Volkswagen has an established research and years of experience, as well as the profitability and cash flow to do it. Cost cutting is not even completed and it already has increased margins on sales. Volkswagen compared to GM and Toyota has a bloated employee payroll, so they have easy ways to improve their costs which are not reflected in their business. The crisis has given it the ability to make meaningful changes. Sales have started recovering in all their markets.

I think they will be a good medium to long-term play.

Another option is Daimler which was hurt a bit due to the Dieselgate scandal. Their trucking business Fuso has shown great sales with the new eCanter truck (Fuso, while a Mitsubishi brand, is now mostly owned by Daimler). These guys have a lead in eco friendly shipping and will probably do better than Tesla IMO.
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xgbsSS wrote: Longer term, i think so. Volkswagen has a relatively larger discount compared to peers. They have a huge cash generating power, and for the most part, their lawsuits and settlements are accounted for. Yes, they are going to have to have larger expenditures if they are planning to invest in all-electric, but this is the same for all car markers regardless. Unlike Tesla, Volkswagen has an established research and years of experience, as well as the profitability and cash flow to do it. Cost cutting is not even completed and it already has increased margins on sales. Volkswagen compared to GM and Toyota has a bloated employee payroll, so they have easy ways to improve their costs which are not reflected in their business. The crisis has given it the ability to make meaningful changes. Sales have started recovering in all their markets.

I think they will be a good medium to long-term play.

Another option is Daimler which was hurt a bit due to the Dieselgate scandal. Their trucking business Fuso has shown great sales with the new eCanter truck (Fuso, while a Mitsubishi brand, is now mostly owned by Daimler). These guys have a lead in eco friendly shipping and will probably do better than Tesla IMO.
I know demand for the new VW Atlas in the US was pretty good considering it was entering a crowded marketplace... and if they can actually pull off the all-electric VW Minibus ( called the ID Buzz concept ) in a few years... I think they'll command a good lead. I agree about them doing as well as Tesla or better... Tesla is a great brand and company, but if VW can offer a similar product with the VW brand and influence, I think it will do well. Tesla is also either fairly valued or overvalued... and carries more risk as their fortunes are dependent on a small number of, albeit well loved, vehicles.
I'd love to write history... in advance.
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atomiton wrote: I know demand for the new VW Atlas in the US was pretty good considering it was entering a crowded marketplace... and if they can actually pull off the all-electric VW Minibus ( called the ID Buzz concept ) in a few years... I think they'll command a good lead. I agree about them doing as well as Tesla or better... Tesla is a great brand and company, but if VW can offer a similar product with the VW brand and influence, I think it will do well. Tesla is also either fairly valued or overvalued... and carries more risk as their fortunes are dependent on a small number of, albeit well loved, vehicles.
Tesla I find has been over-promising and under-delivering especially in regards to self-driving. While they have already built quite a bit of goodwill, I find that these kind of things plus the delayed output of vehicles are going to start eroding that goodwill. Elon Musk needs to be more pragmatic and realistic in my opinion otherwise customers will start alienating the brand. I find the market is betting on them leading the market, which in some ways they are, but with a profitability and earnings similar to GM and Ford today? I find that a bit of a risk and they will likely falter in the next few years. I think they will succeed eventually, either through partnering with an establish automaker or going it alone and suffering a malaise. Once output is out and cashflow begins, they may start to show profits.

To me, Volkswagen is the better value proposition with less risk at the moment. We are talking about an established businesses with obvious problems with relatively easy things for management to fix. High costs can be solved. Tesla figuring out how cars can drive themselves is a much harder task.
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xgbsSS wrote: To me, Volkswagen is the better value proposition with less risk at the moment. We are talking about an established businesses with obvious problems with relatively easy things for management to fix. High costs can be solved. Tesla figuring out how cars can drive themselves is a much harder task.
Not to mention, once you do the tough work of figuring it out and working the laws through... the more established car companies are going to piggy-back on that success. That being said, it's pretty great to see another car company born. They're not hard to birth out... especially without massive government support and subsidies.
I'd love to write history... in advance.
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atomiton wrote: Not to mention, once you do the tough work of figuring it out and working the laws through... the more established car companies are going to piggy-back on that success. That being said, it's pretty great to see another car company born. They're not hard to birth out... especially without massive government support and subsidies.
It's actually rather sad. The true innovator is not the one that will necessarily be the victor/profitable one. It is the one with larger capital to begin with. The same can be argued with Bombardier and the C-Series. Innovative plane with tremendous potential and bringing much needed competition. But it will be Airbus who benefits in the end.

I do wish Tesla a lot of success, but my stock bet is VW right now.
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Financial Times Article on recovery in stock price
https://www.ft.com/content/a12ec7e2-fa0 ... d59aace167
http://outline.com/k5zhxC

Since October, i am sitting on a little over 20% gain. I think there is still more room to go. There are still risks but i believe they can fight through them.
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I had sold off most of my holdings a few months ago, and have been looking at this again. Big sell off with the arrest of the Audi CEO and tariff talks by Trump haven't helped the auto sector. That being said, tariffs are not guaranteed and demand for vehicles are still strong. As a longer term name, I still like VLKAY. I am looking at accumulating shares again as a longer term hold especially at these depressed prices.
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Just a heads up, if you still own VLKAY, you should know those are now delisted.

There is an option to convert these to another share but instead of ADR from JP Morgan it's an ADS (VWAGY). it is roughly the same value converted to ADS.

You also get option of taking the underlying Volkswagen shares in Germany, but you pay the $200 transaction cost each way to your broker.


**** If you do nothing then you forfeit your VLKAY shares completely in February 2019 and pay a fee on top of that.

Contact your broker if you still have these shares and pick an option before they literally turn into a negative worth investment.

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