LOLLAPALOOZA. Ira Sohn May 4,

Transcription

1 LOLLAPALOOZA Ira Sohn May 4, 2016

2 Disclaimer This presentation has been distributed for informational purposes only. Neither the information nor any opinions expressed constitute a recommendation to buy or sell the securities mentioned, or to invest in any investment product or strategy related to such securities. It is not intended to provide personal investment advice, and it does not take into account the specific investment objectives, financial situation or particular needs of any person or entity that may receive this presentation. Persons reading this presentation should seek professional financial advice regarding the appropriateness of investing in any securities discussed in this introduction. The author s opinions are subject to change without notice. Forecasts, estimates, and certain information contained herein are based upon proprietary research, and the information used in such process was obtained from publicly available sources. Information contained herein has been obtained from sources believed to be reliable, but such reliability is not guaranteed. Investment accounts managed by GreenWood Investors LLC and its affiliates have positions in the securities discussed in this introduction. GreenWood Investors LLC may re-evaluate its holdings in such positions and sell or cover certain positions without notice. No part of this presentation may be reproduced in any form, or referred to in any other publication, without express written permission of GreenWood Investors LLC. Past performance is no guarantee of future results.

3 Our portfolio consists of a great team of managers guiding under-appreciated companies through transformational moments in their history.

4 Lollapalooza

5 What if you could get this 3G Capital Berkshire Hathaway Markel

6 At his preferred Valuation Ben Graham

7 Forward PE 26.6x Forward PE 32.8x Price / Book 1.60x / 160% Price / Book 1.41x / 141% Obviously this isn t possible. Source: Factset

8 Combing the World For Another 450% 400% Early Career Absolute Performance 250% Early Career Relative Performance 350% 200% 300% 250% 150% 200% 150% 100% 100% 50% 50% 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 0% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

9 A Price Ben Graham Would Love Price / NAV 0.65x / 65% Price / Book 1.41x / 141%

10 Powerful Value Drivers Reinsurance capital Value-Added Investor Less Investor Competition Exceptional Management teams ROIC Focus Concentrated, Contrarian

11 Why Does This Opportunity Exist?

12 Worst Performing Index in the World YTD 30% YTD Stock Market Index Performance 25% 20% 15% 10% 5% 0% -5% -10% Italy China Japan Finland Switzerland Sri Lanka Belgium Israel Denmark Portugal Europe Czech Germany Sweden Austria Hong Kong Spain Australia France Singapore India Malaysia UK Netherlands Norway Poland Taiwan South Korea Philippines USA Pakistan South Africa Indonesia New Zealand Canada Mexico Chile Venezuela Thailand Egypt Hungary Argentina Turkey Russia Brazil -15%

13 Consumer Record Highs Italian Unemployment & Consumer Confidence 1/1/95 11/1/95 9/1/96 7/1/97 5/1/98 3/1/99 1/1/00 11/1/00 9/1/01 7/1/02 5/1/03 3/1/04 1/1/05 11/1/05 9/1/06 7/1/07 5/1/08 3/1/09 1/1/10 11/1/10 9/1/11 7/1/12 5/1/13 3/1/14 1/1/15 11/1/15 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% 15.0% Better Confidence (LH) Unemployment (RH - Inverse)

14 4.4% Revenue from Italy

15 Now a Significant Discount to NAV NAV (LH) Discount (RH) 45.0% 40.0% % % Stock (LH) 25.0% % %

16 Flashback to Markel s Alterra Deal $1,000 $900 Stock Price (LH) $800 $700 Price / Book (RH) $600 $500 $400 1/6/12 3/6/12 5/6/12 7/6/12 9/6/12 11/6/12 1/6/13 3/6/13 5/6/13 7/6/13 9/6/13 11/6/13 1/6/14 3/6/14 5/6/14 7/6/14 9/6/14 11/6/14 1/6/15 3/6/15 5/6/15 7/6/15 9/6/15 11/6/15 1/6/16 3/6/16 2.0x 1.9x 1.8x 1.7x 1.6x 1.5x 1.4x 1.3x 1.2x 1.1x 1.0x

17 We Don t Want the Discount to Narrow NAV Per Share Discount to NAV (RH) Stock Price Repurchase Volume 60% 50% 40% 30% 20% 10% /1/13 2/1/13 3/1/13 4/1/13 5/1/13 6/1/13 7/1/13 8/1/13 0%

18 Concentrated Private Equity Portfolio NAV: Vs (35% Discount) 7.36 Others 2.96 Net Debt All figures per EXO share

19 History of Value-Add Management 160% 140% 120% 100% 80% 60% 40% 144.6% March 2007 May % 20% 12.1% 0%

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21 Best-In-Class Underwriting 140.0% 130.0% Berkshire PartnerRe Munich Re Everest Re Swiss Re Hannover Re 120.0% 110.0% Better 100.0% 90.0% 80.0%

22 20-Year Pre-Investment Combined Ratio 98.9% 99.0%

23 98.9% Free Capital

24 Reasonable Price Paid $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 0.86x 1.08x Cash Paid Tangible Book Value Reserve Redundancies

25 Capital Leaving Industry 140, , ,000 80,000 60,000 40,000 20,000 0 Estimated Global Reinsurance Capacity Lower interest rates make funding from reinsurance policies less attractive to non-core players.

26 A Capital Junkie in a Mad World

27 CEO s Focus Matters 200% 184.1% 150% 100% 71.2% 57.8% 50% 53.9% 36.6% 32.2% 28.9% 22.7% 0% 4.4% -50% -8.3% -17.8% -20.1% Marchionne Mulally Toyoda Zetsche GhosnRenault Ghosn Nissan Winterko rn Mueller Tavares Fields Barra Krueger 6/04 9/06 6/09 1/06 5/05 6/01 1/07 9/15 3/14 7/14 1/14 5/15 ROIC Global Platform Crisis Mgmt Restructuring Global Platform Crisis Mgmt #1 in World Crisis Mgmt Crisis Mgmt Mobility Product Electric

28 A Junkie Who No One Believes 10,000 FCA's Projected EBIT 9,000 8,000 7,000 6,000 5,000 4,000 3, Estimates Plan

29 Who Has Missed A Few Targets

30 Capital Redirected Investment: $3,718 Fiat cash outlay 2015 FCF: $3,728 (Our Estimates) 100% Cash ROIC

31 Key Drivers 1. New Product 2. Reduced Incentives on Old Vehicles 3. Commodities Savings 4. Balance Sheet Savings

32 1. New Product Next 12 Months Model Base Case Volumes Base EBIT Contribution % of 2015 EBIT Bear Case Volumes Bear EBIT Contribution % of 2015 EBIT Alfa Romeo Giulia 76.6k % 54.8k % Maserati Levante 25.2k % 11.2k % Fiat Toro (Brazil only) 69.1k % 30.3k % Chinese Local Jeeps (Cherokee & Renegade) 190.0k % 152.0k % Fiat Tipo 71.7k % 43.5k % 2016 New Segments 432.6k 1, % 291.8k % million tailwind

33 2. Reduced Incentives Model Town & Country Jeep Compass / Patriot Old Model Dodge Journey Fiat Punto Refreshing* Q H 2016 Mid 2016 Q Avg. MSRP $35,471 $23,058 $26,828 10,990 Current Incentive $4,500 $3,750 $2,875 2, million tailwind

34 3. Commodities Savings Commodities per vehicle 12/2014 Value 12/2015 Value Change Steel $669 $432 -$237 Iron Castings $34 $19 -$14 Aluminum $287 $236 -$51 Copper / Brass $168 $126 -$42 Platinum $128 $94 -$34 Rhodium $18 $9 -$8 Palladium $56 $40 -$17 Plastic $260 $168 -$92 Rubber $639 $457 -$182 Total (per vehicle) -$ Volumes (millions) 4.16 Total Fleet-Wide Change (millions) - 2,833 > 700 million tailwind if 25% Pass Through

35 4. Balance Sheet Savings 25,000 20,000 FCA Harmonized Balance Sheet Net Debt Cash 15,000 10,000 5, ,000-10, ,346 Interest 1,699 Interest 1,229

36 ~75% of 2015 EBIT Incremental

37 Balance Sheet Strengthening 1.60x 1.40x 1.20x 1.00x 0.80x 0.60x 0.40x 0.20x 0.00x -0.20x Net Leverage Historical Forecasted Investment-Grade Rating Coming

38 Relative Fair Value Average Ford Valuation Current Price Average GM Valuation

39 Agricultural Coiled Spring

40 Production < Retail Demand

41 Corn Still Below Economic Break-even $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Breakeven Price Corn Price Source: USDA

42 Heavy Short Exposure 200, ,000 CBOT Open Interest Corn Price , , /16/06 6/16/07 6/16/08 6/16/09 6/16/10 6/16/11 6/16/12 6/16/13 6/16/14 6/16/15-50, , ,

43 Winding Up the Coiled Spring Days to Cover Short Interest

44 Significant Operating Leverage 7.7% 2015 EBIT Margin 31.2% Incremental Margin

45 Normalization Drives Significant Upside $1, Industrial EBIT +$1,294 Ag Demand Normalization

46 Is Ferrari a Luxury Company?

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50 Limited Editions Outperform the S&P % 20.0% 19.4% 18.6% 15.9% 15.0% 11.9% 13.0% 10.0% 8.3% 7.6% 6.5% 6.1% 4.0% 8.7% 6.6% 5.0% 0.0% 250 GTO 288 GTO F40 F50 Enzo 599 GTO

51 Even Looking at the Worst Performer

52 What other products appreciate in value after sale?

53 Demand Recession-Proof 40% 30% 20% 29% 18% Cumulative 10% 0% 7% 3% -6% -9% -10% -20% -30% -40% -50% Burberry Hermes Ferrari LVMH Prada BMW Daimler -21% Porsche -32% Lamborghini* -41% Bentley -60% -70% -59%

54 2015 Car Deliveries +6% Incremental EBIT margin 76%

55 FCF > Double % FCF per share (LH) FCF Yield (RH) % 10.0% 8.0% 6.0% 4.0% % %

56 Cheapest In Class 30.0x 25.0x 27.6x 15 EBITDA 16 EBITDA 17 EBITDA 20.0x 15.0x 10.0x 15.3x 11.0x 8.8x 8.9x 8.6x 8.3x 5.0x 5.3x 0.0x Tesla Hermes Man U Burberry Prada Richemont LVMH Ferrari

57 Putting the Pieces Together

58 Concentrated Private Equity Portfolio NAV: Others Net Debt Vs (35% Discount) All figures per EXO share

59 NAV Set to Triple NAV: All figures per EXO share Net Debt Others 2.96

60 Right in Every Way Time Strategy Price % Lowers cost of capital % 35.0% 30.0% 25.0% Are all coiled springs 3G-Style Focus /2/15 3/2/15 5/2/15 7/2/15 9/2/15 11/2/15 1/2/16 3/2/16 5/2/ % 15.0%

61 Learn from Others Mistakes 20k Class A BRK Shares Sold at ~$35

62 Set it and Forget It.