With electric vehicles (EVs) in investors’ spotlight, Volkswagen (VWAGY) has been much talked about as an excellent conservative play on this theme, explains Carl Delfeld, a leading international investing expert and editor of Cabot Explorer.
As arguably the largest automaker in the world, VW sold more EVs last year than any other company in the world. But another holding company and brand, Porsche Automobile Holding (POAHY), has a controlling interest in Volkswagen.
And with typical Teutonic complexity, Porsche, in turn, is one of the many divisions of this auto giant, along with VW and Audi, and owns prestigious names including Bentley, Lamborghini and Bugatti.
Porsche owns 31.4% of Volkswagen equity but has 53.3% voting control of the company. Surprisingly, Porsche is Volkswagen’s most significant profit center, followed by its Audi brand. Porsche also owns the prominent Taycan EV, priced from $79,900 to $187,600, as a sedan or an SUV.
Porsche launched its Cayenne SUV way back in 2002 and in 2020 sold more than 90,000 Cayennes, by far its best seller with almost three times the sales of its most famous car, the 911. But most of Porsche’s profits come from its 911 sports car.
Porsche also just announced a joint venture with Customcells to produce high-performance batteries that will significantly reduce charging times. The partnership will aim to develop car batteries with higher energy density than prototypes used in Porsche’s current electric cars.
The stock offers momentum and value. While the U.S.-listed shares of competitor Ferrari (RACE) trade at about 41 times forecasted 2021 earnings, Porsche trades at a mere seven times consensus forecasted earnings for 2021.
Last quarter’s earnings were up 905% over their previous pandemic comparison, with the stock nearly doubling since last September. Still, the stock trades at just 73% of book value and has only $37 million in debt.
Porsche is a great example of what I call “pink sheet blue chips,” which trade over the counter. This stock has great trading volume and liquidity, so its OTC trading is not an issue. Let’s start with a half position.