I wrote about the winning entry for this year's FactSet Special Situations investing contest, the Italian conglomerate with new management Finmeccancia (FINMY) here a couple of months ago. I liked the idea so much that I reallocated funds in my international investing account from NN Group (Amsterdam: NN) to buy in with real money.
Fast forward a couple of weeks and an anonymous author on Seeking Alpha published a bearish article on the company (* see my note below for my thoughts on anonymous short sellers). Today the author of the great original write-up on Finmeccancia, Steven Wood of Greenwood Investors, posted a detailed rebuttal to the anonymous SA short piece over on the Sum Zero site. I highly encourage others to check it out. Here's an excerpt:
"We are happy to present a research update and also a response to an anonymous author's bearish case for an investment in Finmeccanica. Despite the best efforts of Caesar Augustus, as the author calls himself, to portray an investment case in Finmeccanica as an outright foolish one, the author's case is anchored on historical events, false assertions and incorrect hypotheses of both current and future business prospects of the company. We are most grateful for the earnest attempt at a bearish argument against Finmeccanica, as we publish research specifically to elicit a debate. Augustus has affirmed our bullishness in finding no deal-killing reasons to avoid the shares.
Just after the bearish article was published, which speculated that restructuring would be impossible to achieve and the plan would be delayed, the company hosted an investor day which presented an industrial plan with exactly the same components we mentioned in our original report: reductions in R&D and capital spending, cost cuts, expanded operating profit margins, debt reductions and noncore asset sales. Near-term improvement in guidance includes no heroics, nor all the cost savings identified by new CEO. Trading at 5.4x ’16 EBITDA (47% discount). Significant upside remains."
Finmeccanica is up over 5% today in trading in Italy.
* OK now for the rant. Anonymous short sellers are a real pet peeve of mine. If you're confident in your investment case, be man enough to attach your real name to an idea. I really frown upon anonymous articles that bash companies. That whole situation with Chicago Bridge and Iron (CBI) last year and the anonymous short selling "research group" that calls itself "Prescience Point" still gets my goat. They're the worst because their call on CBI wasn't even right, just absurdly lucky. They cried about the company's accounting practices, taking a short position and were bailed out by a timely (for them) collapse in the price of oil that hammered CBI's stock. Adding insult to injury, after the fact they had the nerve to take to Twitter to gloat about their "victory" while real people, who work for the company and have invested their hard-earned money in it watched their savings melt away. I personally don't short companies with real money and if I did I wouldn't cheerlead as I watched other investors lose money and real people lose their jobs and their families' lose their livelihood. Prescience Point whoever he is is an immature, pompous scumbag. I bought into CBI only after the "firm's" initial bear raid and have added to my position after the subsequent drop. As I wrote the other day (LINK) I feel as though it will ultimately end up being very profitable.