Differences in luxury

July 26, 2024 Leave a comment

Not all luxury companies are being run the same way

There is one company which owns some significant luxury brands;

whose net debt amounts to 41% of its market capitalisation,

has increasing inventories and now equal to 23% of its annual revenue;

where its receivables are rising,

its net interest expense soaks up 15% of its EBIT.

and 82% of its net income leaves the corporation, in the form as dividends.

It’s one thing to suggest weaker business conditions as a result of slowing consumer demand, but when quickly looking at the ‘numbers’, it’s easy to understand why the stock price has halved over the past 18 months.

It’ll be cheap at some point.

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The economics of the combustion engine prevail

May 25, 2024 Leave a comment

My note dated, November 17, 2020 was titled; “A bet that the Internal Combustion Engine still has 30 years of life“

Investment Thesis: Long Platinum

An extract from my late 2020 note included,

“It’s unlikely that automobile manufacturers will walk away from the capital expenditure spent on engine development and assembly, while synthetic fuels are making ICE’s even more cleaner.

Commensurate to introducing electric vehicles into their stable, auto companies have also made statements that they still expect the ICE to be part of their business for the next 30 years.

The note also observed Palladium’s premium above the price of Platinum (implying that the gap is narrowed as Palladium declines and Platinum rises) along with my expectation of mean reversion/convergence in the Gold price.

Gold did mean revert, Platinum rose and Palladium’s premium collapsed.

Since that note was published, both Platinum and Gold have risen 11%.

And Palladium is now cheaper than Platinum.

Now, Mercedes Benz has said it will continue to make combustion-engine and hybrid vehicles “well into the 2030s,” if demand is there.

https://www.bloomberg.com/news/articles/2024-05-08/mercedes-retreats-to-gas-guzzlers-as-evs-fail-to-boost-profit?utm_source=website&utm_medium=share&utm_campaign=copy

The article continued to say, “And with China not phasing out sales of new combustion-engines until 2060,”

May 25, 2024

by Rob Zdravevski

rob@karriasset.com.au

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Hamilton leaving Mercedes shouldn’t impact sales

February 2, 2024 Leave a comment

Ferrari shares rise 9%. Does the share price of Mercedes-Benz AG suffer the inverse fate?

While I don’t care about what an athlete is paid to execute their sporting obligations, I wonder if Mercedes Benz sells less AMG (performance) vehicles and Ferrari sells more, in light of Lewis Hamilton’s decision to change employers?

Below is an image of Lewis Hamilton featuring in a #marketing campaign to sell the 2024 Mercedes GT Coupe.

Nike may have sold more golfing apparel due to Tiger Woods modelling their wares, but they may not suffer now that their mutual association has ended.

The wedding announcement and subsequent marriage is fruitful while the divorce may not have a meaningful impact.

February 2, 2024

by Rob Zdravevski

rob@karriasset.com.au

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