Tag Archives: Volkswagen

Volkswagen: the influence of management in the stocks

There is a continuous debate between analysts and investors who take into account different figures in order to decide where to invest: some prefer to obtain details about the turnover, the returns, the evolution of the demand in the sector, amongst others; some others prefer to analyse the evolution of the chart in the exchanges. Fundamental and technical analyses are the main systems for investors to try to know if the share is right to invest. But what if there is a sudden management mistake? What if the managers have lied in the business?

Volkswagen is a new case of wrong management with hard effects on the exchanges. The manipulation of the car engines with a software to cheat in the CO2 emissions was something unexpected, because markets accept that companies are doing a fair competition, that they are showing real figures of their business… In other words, trust is the base of markets and investors. If we look at the T-Report of Volkswagen, we find that the evolution of the share was not positive in the last year, but there is a hard break in September:

Volkswagen chart in year to date

A comparative analysis with Eurostoxx 50 shows also this break in the trend:

Volkswagen comparison with Eurostoxx 50

Another chart points out the relative position when performance and volatility are linked:

Volkswagen comparison with MSCI

Finally, all models show a deep negative trend in the future evolution:

Volkswagen trend models

The question is: what can an investor do? Unfortunately, no model and no analysis can preview unfair management before the truth emerges. The history of false figures or manipulation is long: Toyota and General Motors also hid defects in their engines, Enron or Gowex manipulated their balances and the profit and loss accounts… The court is the only solution to try to recover some of the losses in the investment. Volkswagen knows it and that is why the company set aside 6.5 billion euros to deal with the long demand list for damages, not only by consumers but also for governments. However, there is a bigger damage: the shadow over an industry.

Carmakers: opportunities for a recovery

Carmarkers' brands

Carmakers are one of most damaged industry in the current economic crisis. The drop of consumption, the high oil prices and the cut in the credit flows hit the branch severely. The figures from the International Organization of Motor Vehicle Manufacturers (OICA) show the trends: Europe and North America have fewer sales now than before the crisis. However, global figures are higher, because China multiplied 4.5 times the sales in 2013 compared with 2005.

China is the promising market for carmakers, as US, Western Europe and Japan have a low recovery. India does not have the expected development for this branch, although the current government is more opened for business.

If we collect the figures from the four largest carmakers, the results are as follow:

Toyota figures in T-Advisor

The largest carmaker, the Japanese Toyota, increased the revenues 16.4%, till ¥25,7 billion, in fiscal year 2014. Net income almost doubled, till ¥1,8 billion, in the same period.

Volkswagen figures in T-Advisor

The German carmaker improved the revenues 2.2% in 2013, till €197 billion. Net profit dropped a 58.2%, till €9.1 billion.

General Motors figures in T-Advisor

Revenues from the American carmaker increase 2%, till $155.4 billion, in 2013. Net income fell 22.4%, till $3.8 billion.

Carmakers: Renault figures in T-Advisor

Renault, the French carmaker joined with the Japanese Nissan, earned just a 0.5% more in 2013. The revenues reached €40.9 billion. Net income, however, dropped a 59%, till €700 million.

The comparison in the main data made by T-Advisor has the following results:

Performance

YTD

Volatility

YTD

Score

Liquidity

VaR

1 week

Toyota

3.53%

11.61%

9.74

10

-6.82%

Volkswagen

10.58%

24.07 %

7.33

9

-4.86%

General Motors

-5.93%

22.08%

7.17

9

-9.20%

Renault

12.59%

32.85%

8.48

10

-6.88%

Investors show interesting opportunities in European carmakers, as the current performance in 2015 is high. However, the best T-Advisor score belongs to Toyota, which is also the least volatile stock. The worst is General Motors, with the lower performance and score and shows a very high VaR.