Patrick R. McDowell, CFP®, AIF® was quoted in a US News & World Report article by Brian O’Connell discussing the pros and cons to buying Fiat Chrysler stock.
Stock buyers increasingly see value and opportunity with FCAU, as the automaker is viewed as a positive outlier in a mediocre auto sales climate.
“We recently got long FCAU and made it one of our larger positions,” says Patrick McDowell, portfolio manager at Arbor Wealth Management in Destin, Florida.
McDowell points to several factors that have him bullish on the stock.
It's a good value. The company is cheap on just about any metric for a profitable going concern. “Auto investors appear to be pricing in 2008-level auto sales on a go-forward basis,” McDowell says. “Fiat Chrysler thinks they can be profitable even in that scenario.”
The company has plenty of cash. Fiat Chrysler has quite a bit of cash on the balance sheet and that cash balance will grow with the Magneti Marelli sale (to KKR’s Calsonic Kansei, in October), McDowell points out. “That should mean FCAU ends the year with around 40 percent of the market cap in cash,” he says.
Another merger could be near. McDowell believes the entire company is ripe for a merger or acquisition in the near future. “We think the auto parts and potentially the robotics arm Comau businesses being sold are a prelude to a full-fledged sale or merger of the company with a rival,” he says. “In order to fetch a better price in a potential sale, we think a tender/buyback or a stronger dividend is in the cards in the near future.”