October 16, 2007
– Comments (8)
Here's my most recent video pitch for CAPS TV - this one on Tata Motors (TTM).
Feedback, criticisms, hate mail, suggestions are all welcome and appreciated.
Here is a video I shot while being driven in India (Tata vehcile as I recall).
One thing to consider in Tata's growth potential is infrastructure. I don't believe that India has made the commitment to infrastructure that China has. I did not travel between cities so I'm really not in a position to comment on the growth potential of motor vehicles. It may be that there is currently limited market due to limited use potential.
The US interstate highway program of the 50's was huge in factoring into the economic success of this country in the last half of the 20th century (and a enabler of the big box marts like Wal-mart and HD which struggle to expand overseas into countries that don't have a similar system).
Great pitch! Some of the additional Tata clips were interesting, particularly the one about Tata possibly buying Jaguar and Rover from Ford.
I looked at Tata's chart and noted that as recently as August, it was selling at its 52-week low in the $15 range. I was going to ask about what you thought of its current valuation, but then noted that Tata currently isn't in the black, though a forward PE of 14 is anticipated. Do you have a "buy around" price for Tata? Any comments about what's behind the current valuation? (A bad year or the costs of expansion?)
Again, great job! I expect you'll be a stock millionaire long before you're 30!
Thanks for the kind words!
Over the past year Tata has been for the most part in the dumps and only recently started to pick back up. In the long run (10-15 years minimum), I don't think it will really matter what price you get it at today - be it $17 or $20. If you can, I would ease into a position, simply because it's obviously difficult to know where the stock will go in the shorter-term. My personal opinion is that Tata shares are undervalued at these levels. Other than this, I don't have a whole lot more to give you. I'd recommend easing into a position over time and invest at better value points along the way.
How do you see the purchase of Range Rover and Jaguar fitting in the mix? For a developing country I would think that the low end of the spectrum would be their primary market focus.
Thanks for the pick by the way. I had picked and ended it prior to viewing your pitch, but restarted after your presentation.
You may have already read/seen this article but just in case.
If someone with the cred of TDRH can post on your blog 3 months late, I can post 5 months late.
Pencils, how do you see LOOP holding up in the event of a prolonged, inflationary recession?
Hey David, I'm sorry but City CAT is not from Tata Motors... maybe they're outsourcing it. The guy that invented has its own company. His name is Guy Névre, former Formula 1 engineer, and has been working on prototypes since 1989, and his company is MDI. You can look on youtube for "MDI Car" and you'll see many of his car's, vans, motorcycles, all motored by air... The launch for the car is suppose to be 2008 as you said.
...personally im not a fan of car companies, but TTM does sound like a good growth candidate.
Considering cars being built are subject to the raw materials used to build them, commodity prices can greatly affect the cost of building the car. Ultimately the cost to buy the car as a consumer. Generally, companies that produce parts for big projects (cars, airplanes) do better than the final producer as well. While this sounds pretty negative to your pick we'll have to see how things pan out.
What makes TATA sound attractive is to take the approach of "high volume and low margin" in order to make money, similar to that of a supermarket (sell alot, for just a little profit). The market for cars sold in india certianly is impressive... no one owns a car! While this maybe great for TTM as the market is vastly open to selling cars in india... They may have a hard time competeing else where. as the preformance, effeciency, safty, ect. the other companies provide (are providing? could provide?). and it is very possible for someone to move and try and grab this market as well. Toyota's Yaris sells for about 10k in the US... TATA is selling something near i think 3k... right? A gap that could shrink as the japanese are very competitive... Purely built on my speculation.
Whats kinda hard to explain is that car companies suck! The success of TM on HMC are visable on any chart compared with the S&P 500 as both outperformed over the past 5 years. These cars typically sell higher too in the US. Meanwhile, US car companies F and GM have declined more than the S&P 500 and have a return of -25% and -50% over the time period repectfully. But here is the importantly part: All major car companies have lagged the market when looked at span greater than about 6 years. one exception: TM. The main reason for this is simply its the industry, too much competition... everyone cuts there margins, price of workers, materials, ect., and shareholders suffer.
Its critical that the price of the car does have alot to do with TATA in its local market, but over the expansion of the indian economy, this simply won't mean anything.
Over the real long term, TTM doesn't look attractive to me (commodity businesses depending on commodities prices). While TTM is a great growth prospect, it maybe something to get out of after some time or any news develops with them and competition... But right now, they have almost a regional monolopy, which is great for business.
Good post BTW.