TM - The Undervalued Volkswagen: Your Free Pass To Rivian's Success

2024-07-07 12:24:15 ET

Summary

• Volkswagen is significantly undervalued, with its investments in Porsche AG, Traton SE, and other premium brands effectively making its other assets, including Rivian, "practically free" for investors.
• The company is strategically investing in electric vehicle technology and partnerships, including substantial stakes in Rivian, Xpeng, and innovative battery technologies through PowerCo, to enhance its competitiveness and future profitability.
• Despite past challenges, Volkswagen has restored profitability, maintains a robust balance sheet, and continues to innovate, positioning itself for growth in the competitive EV market, particularly in China.

Value investors who have read the early investments made by legendary investors like Warren Buffett and Peter Lynch probably experience a little bit of envy about some of the extraordinary opportunities that existed at that time.

One example was Buffett's investment in the Sanborn Map Company, where at one point Buffett allocated nearly 35% of the portfolio. While the core map business was experiencing declining profitability, the company had an investment portfolio of high-quality stocks valued at roughly $65 per share, while its shares were trading at roughly $45. In other words, the map business was valued at a negative $20 per share. While it has become extremely difficult to find such clear value investing opportunities in the U.S., where valuations have become extremely stretched, it is a little bit easier in markets where valuations have remained closer to historical averages....

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