Business Breakdowns
· Krishna Mohanraj
Just the way the markets are structured, it definitely looks exciting, and we will see how that evolves. And as that becomes successful along with bioMérieux—again we spoke about it—leading scientific group in that space, shared ethos of family ownership. In five years, Exor could be a legitimate player in health tech. At the very least, they will learn a lot in that space, and that could change the flavor of this group for the better. With a holding company set up like this and a leader who's opportunistic, doesn't seem afraid to make changes and take decisions, it's very hard to come up with a five-year view, let alone a ten-year view. So who knows what this group looks like in five years. To some extent, that also makes it exciting. Especially if you think about buying a collection of global assets right now at a huge discount and potentially significant optionality over the next five, ten years. I think it's definitely a bet on the jockey more than just on the current set of assets.
· Zack Fuss
[00:00:00] S0: Just to highlight that discount to NAV, we have a business or collection of assets today that would be valued around €180 a share, trading in the market for around €100. Clearly there's significant opportunity to close that discount. But also to your point, a handful of the most significant assets are themselves trading at somewhat modest multiples. Philips obviously has a turnaround story. CNH and Stellantis, which are going through their cyclical trough. The opportunity set here is seemingly massive, not just to close that discount, but also to continue to compound NAV. Unfortunately, we're coming up on time, and I want to ask our customary question: when you look at this story and the research that you've done, what are the lessons that you've learned that you can apply to other investments? And conversely, or alternatively, what are the other lessons that can be learned that can be applied to businesses or holding companies to improve the operational execution for their businesses?
· Krishna Mohanraj
[00:00:00] S1: Following Exor over long periods of time, it's really like living through a live global case study in investing. There's so much to talk about, and we've touched upon a few of those themes. The one clear lesson that stands out is decisiveness. When you have to make a decision, make a decision. If it turns out to be wrong, fix it. There is none of what Buffett calls thumb sucking—hesitating, waiting on decisions. There's no "on the one hand, on the other hand," and then delaying decisions. If you follow Exor, and I have since inception in 2009 and also before that through Fiat, things are usually quiet, as you would expect from an investment holding company with a very long time horizon. There's not too much daily, quarterly noise, but maybe two or three times a year there is some specific, intentional decision that is moving the group in a certain direction. That comes from the clear intent to renew, refresh the portfolio with time. And I think that comes from Elkann's initial years with the group, the crisis, the fact that they had to find Marchionne as the CEO on the fourth or the fifth attempt within two years. What he learned was if they had stuck with the status quo, they would not have survived. I think that makes Elkann decisive, willing to change. When CEOs don't work out, no hesitation to try something different. Long-term investors tend to have a bias to no action, sitting on past decisions in the name of long term and patient. But investment decisions are not perfect. People decisions are not perfect. Even if they were good decisions for when you made them, the environment changes. It's always worth revisiting. I think it's a good lesson for us long-term investors when we understand that our bias is towards no action, to ask if we are hiding behind long term because we are afraid of uncertainty, to try and be more decisive and make decisions when you have to make decisions.
· Zack Fuss, Krishna Mohanraj
[00:00:00] S0: That was a really interesting summation of a business that probably could take countless hours or days to cover in sufficient depth. And so I think this is a great introduction to Exor, and we'll continue to monitor the story and the situation as the business evolves. [00:00:00] S1: Thank you, Zack.