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Exor Shares Not Reflecting the Run-Up in Fiat Chrysler

Exor, the holding company for the Agnelli family in Italy, has seen some major changes to its portfolio in recent years including the sale of commercial real estate broker Cushman and Wakefield and the purchase of reinsurer PartnerRe.

The fortune of the Agnelli’s was made through Italian car manufacturer Fiat. Exor still owns 29.2% of Fiat Chrysler today. Not long ago, Ferrari was spun-out of Fiat Chrysler, giving Exor a 22.9% stake in that company as well. Other interests include CNH Industrial, The Economist, and the Juventus Football Club.

Fiat Chrysler shares have been surging in recent weeks as investors embrace news of a potential merger or spinoff of the company’s Maserati division, moving from around $12 per share to more than $16. That move increased Exor’s stake in Fiat Chrysler by almost $2 billion.

Conglomerates like Exor often trade a discount to their net worth for a variety of reasons, including a layer of added expenses at the holding company level. But, the discount at which Exor shares are trading compared with its net asset value has been widening to a level that is now near 30%.

Based upon the publicly traded components of Exor’s investments, net asset value is now likely in the range of $86 compared to a share price of only $62.

In the coming weeks, more will be learned about PartnerRe’s losses in Hurricane Harvey and potential losses forthcoming from Irma. Despite the short term hit, PartnerRe is well capitalized and would be a big beneficiary if the disasters removed enough capital from insurance markets to cause prices to harden.

Most importantly, John Elkann, the CEO of Exor, has proven himself to be a terrific manager – allocating capital wisely and selecting quality managers for Exor’s businesses. Investors would be wise to consider investing alongside Elkann while also gaining the benefit of an enormous discount to net asset value.

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