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In a Nutshell:
In a matter of one month, traders in shares of Fiat-Chrysler and Ferrari have fully baked-in a full-fledged financial crisis into the stock valuations. EXOR’s discount to NAV has gone from under 20% to over 40% in recent days. Fear has begotten fear, and malaise has set in, as friends close to us are straining to hold onto given the torrential climate. We are not only hanging on, but buying more. Underlying fundamentals of all three entities couldn’t be further from the illusory market environment.
In a recent commentary on the market, Howard Marks postulated the market is more often than not reflecting the views of people who know less than sophisticated investors, and is thus infrequently telling us anything that would change our thesis. We invert that argument in this memo, and ask, “What if the market is right?” If the market is right on these companies, we are heading into to an imminent global recession on a scale slightly worse then the 2008-2009 Great Recession. If we are not heading there in the near-term, all three companies represent a compelling short, medium and long-term investment prospect. This tale of two opposing views (market illusion vs. real fundamentals) cannot exist together, they are mutually exclusive. The market’s adventure in wonderland will not last long.
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