Fiat Chrysler Automobiles N.V.

 I am writing about my recent adventure by investing in Fiat Chrysler Automobiles N.V. (NYSE: FCAU) for approximately five years.

When did I buy and sell it at how much?
I first bought it at USD15.90 per share on 13 October 2015. In Q4 2015, FCAU was on the way to IPO Ferrari N.V. (NYSE: RACE) and then give the rest of the shares, it owned, to its shareholders at 10 FCAU shares for every 1 RACE share. As a result, the adjusted price per FCAU share is estimated to be USD10.47.

At the same time, I received cash proceeds for a fractional share (i.e. 0.5) and tax adjusted dividends.

I sold it at USD15.04 on 17 November 2020. Taking these facts into account, I made an absolute profit of ~62.3%.

About FCAU

Fiat is known as Italian company in the automobile industry. Then-CEO of FCAU, Sergio Marchionne, incorporate FCAU in Netherlands for (probably) tax purpose.

Sergio Marchionne oversaw the acquisition of Chrysler (58.5% in 2009 and then remaining 41.5% in 2014). The reason of the acquisition is very likely to be about his famous presentation (its title is Confessions of a Capital Junkie).

Rationale of Investing in FCAU

I first know about Fiat because of my university classmate, who is Ferrari fan and attend F1 event every year in Singapore. After I learn that Ferrari itself was not public listed company, he told me that Fiat owned Ferrari.

As I had no access to Italian stock market, I kept that in my mind until Mohnish Pabrai told the public that he bought FCAU. By then, I realised that there is FCAU shares in NYSE, where I have the access to buy and sell.

However, I felt uneasy about the limited exposure of Fiat cars in Singapore but I see significant number of Fiat vans. I prefer to have direct ownership of Ferrari shares instead of indirect one.

Late Sergio Marchionne 'gave me a huge present' by spinning off Ferrari. I decided to buy FCAU shares, noting that there is so much upside in FCAU investment.

The sad part is that I wanted to buy more RACE in Dec 2015 but I did not have enough cash to do so. It is a lesson for me to have cash reserves and resist investing in the less attractive investment ideas. This experience benefit me well for COVID-19 pandemic era - I have cash reserves to buy stocks at attractive prices that I conclude it may not happen back then.

Happenings During My Holding Period

When I completed my investment thesis of investing FCAU, I did not know much about Sergio Marchionne. At that time, my understanding of management impact and quality was fuzzy. With this successful investment, I appreciate the importance of competent C-suite management for my compounder quest.

My initial investment thesis is based on my appreciation of Dodge, Jeep, Maserati, and Ferrari while placing low value on Fiat and Chrysler. I had good experience, riding in Dodge car due to Uber bookings.

Over 5 years, I constantly learnt more about Fiat, Ferrari, and Sergio Machionne. I think Sergio Machionne was an impressive C-suite manager, enhancing the value of ex-ante FCAU shares. I further realised that Exor S.P.A, the major shareholder of FCAU, made a good choice to appoint Sergio Machionne.

My appreciation of Sergio Machionne was largely based on his aforementioned presentation.

I felt sad that Sergio Machionne did not survive in his surgery. Exor resolved the succession issue well.

I do not have any opinion about FCAU merger with PSA Group on 50-50 basis.

Rationale of Selling FCAU

I largely agree with Sergio Machionne's presentation. As FCAU began investing in electric vehicles (it is after Sergio Machionne's death), I suspect that the R&D investment in the electric vehicle will yield less attractive return, although it bring huge intangible benefit for the environment. The number of electric vehicle competitors is increasing due to influx of China competitors.

Not going to wait for special dividend, I decide to sell and deploy the cash proceeds to next investment.

I am pleased that my investment thesis is right although I came in late with much higher price per share compared to Mohnish Pabrai's entry price level.

Aftermath of Selling FCAU

I still own RACE shares. While holding RACE shares, I learnt that brand can open up different product segments. I have no issue with RACE's increasing the number of each car model per year. After all, nobody has 100% understanding of the luxury brand so far. Time will tell whether the actual understanding of luxury brand need to be modified with respect to exclusivity. 

Once again, I feel so much regret not buying more RACE shares.