Volkswagen Portfolio Changes

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This topic discusses portfolio changes of Volkswagen.

Our research on Volkswagen is published in our a public Notion Website.

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I increased my Volkswagen position today by 41.5% at a price of €125.00

My main reasons range from cheap valuations (P/E of below 4, discount to book value >50%), good results in 2023 (esp. if adjusted for commodity hedging loss + strong return on sales of brand group), increased management trust and a macro 2024 which looks relatively stable.

I continue to be interested in expanding the position further. Main risk factors to understand better are the medium to long-term macro outlook, esp. when it comes to automotive prices as supply chains ease and competition ramps up. (Volkswagen predicts lower margins of 7-7.5% on a group level in 2024), furthermore, the likelihood of success of the Volkswagen new models 2024 offensive and the likely long-term impact of autonomous driving on a giant like Volkswagen.

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I sold my entire Volkswagen position at a price of €95.32 after Porsche reduced it’s profitability guidance and stopped the development of a (ev) car project in order to focus on more flexibility in it’s driving technology.

There has always been a list of concerns for the Volkswagen group but if anything they got larger over time and include

  • it’s competitiveness when it comes to technology (software, autonomous driving + uncertainty what an autonomous driving future could mean for the Volkswagen Group)
  • it’s competitiveness especially in China
  • it’s competitiveness in EVs (e.g BMW claims new platform is superior)
  • managing a international landscape (tariffs, currency) and high reliance on macroeconomic conditions (cyclical business)
  • it’s high cost basis in Germany and uncertainty if the company can be agile enough to compete with highly capable challengers like Tesla or BYD.
  • high capex to invest in it’s rejuvenation and transformation.
  • very complex and hard to understand conglomerate which increases the possibility of unknown risks.

When i originally initiating the position i was more hopeful that Volkswagen would be able to step up faster and turn things around, given that i like their brands, Blume as CEO and thought that it’s cheap valuation offered some margin of safety and possibility of multiple expansion while offering strong dividends. For me it’s interesting to see that this more “value” oriented investment did not work out as hoped given it’s a bit outside of my usual scope.

The news below served as a catalyst for me to take a decision esp. since the stock had not dropped a lot yet in aftermarket trading. While the news sound very negative it is not guaranteed that the stock market will react negatively on Monday as some investors might applaud a more “realistic” stance and scaling back on EV ambitions.

Finally i believe there are easier investment opportunities with clearer upside, lower risk and easier to understand position. I have to admit we never reached the level of understanding originally targeted by me and now we even have less macro insights.
As always i will continue to reflect on the decision and might revert it.

Update: A few more arguments can be found in a short discussion on Telegram.

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