In this clip from THE PITCH, we give you an inside look at how a research analyst's high-conviction stock idea becomes a manager's winning position.
Watch below as Industrials analyst Jay Van Sciver pitches Hedgeye CEO Keith McCullough on Porsche SE (POAHY), Van Sciver's new 'Best Idea' Long position.
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"Today we're going to pitch Porsche SE (POAH.Y), which is the holding company that has shares of Volkswagen (VW).
So we're going to be talking about $VW, and the reason why this stock trades at such a discount is because it's confusing... but it's actually not that confusing; Porsche SE is a holding company that just happens to hold shares of $VW. The weird thing about Porsche SE is that it trades at about a -30% discount to the value of $VW shares because of legal liabilities. That discount is actually greater than the actual estimated exposure for those liabilities; so it's a weird anomaly in the market. Porsche SE is an unusually attractive way to invest in $VW because of that discount.
In terms of narratives in this market - don't get me wrong I can talk about how cheap the stock is forever. But when we think about emerging narratives, these are the big areas. Self-driving cars and EV's are some of the most momentum-driven areas of the market right now.
When you add all these parts up for $VW, you find that it's trading at half of what it should be. And Volkswagen itself has made some spectacular investments. They have a third of QuantumScape, a promising battery maker, and a ton of other great assets.
And I can buy these shares for a -30% discount through Porsche SE? That holding company discount could go away throughout the year as these lawsuits get settled, which would be a great catalyst. The cool thing about VW (because of diesel-gate) is they invested in so many hot areas - they'll likely be the largest EV maker by the end of the year.
And $VW makes a lot of money; they make almost half of Tesla's revenue just in net income."
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