TIP836: Exor NV (EXO): The Massive Discount Continues To Widen w/ Kyle Grieve & Shawn O’Malley

**SPEAKER_1** (0:00)
You're listening to TIP.

**Shawn O'Malley** (0:03)
Hey, folks. Welcome back to The Investor's Podcast. On today's episode number 836, we are revisiting one of our previously pitched investment ideas, buying shares in Ferrari indirectly through Exor, which is an Italian holding company that has a very large stake in Ferrari, yet its own stock trades at a significant discount to the market value of its investments, including that position in Ferrari.
One way to think about this is that thanks to the wide discount to net asset value, you can effectively acquire exposure to Ferrari's business at a substantial discount. We're talking about more than 50% by simply buying shares in Exor, which is this Italian listed holding company. For starters, you probably have to believe that Ferrari is a compelling business to own, which we'll get into, while also believing that with prudent capital allocation decisions going forward, Exor can convince the market to at least partially narrow its very wide discount to NAV. That's the setup that you would need to believe for this investment to be attractive. If all that happens, where Exor's stock goes from trading, let's say, an implied discount of 60% to its net asset value, to maybe 30% driven by buybacks that force the gap to close, or maybe just improving market sentiment, that would be a huge tail end and that would actually just be double alone from the gap narrowing, in addition to any further compounding of intrinsic value that you get by Ferrari's business, continuing just to keep chugging along. That is the setup.

**Kyle Grieve** (1:39)
The biggest problem with the C-SYS has always been based around timing. The logic makes a lot of sense, but the reality is that we have no catalyst in mind that would help meaningfully close the gap between Exor's own market cap and the underlying value of the assets on its balance sheet. It also hasn't helped that while Ferrari's business remains completely intact, its shares have fallen simultaneously with Exor's.
There's no guarantee that Exor's stock won't keep treading water, even if Ferrari takes off again because investing in Exor certainly complicates your exposure to Ferrari versus buying the Ferrari shares straight up.

**Shawn O'Malley** (2:10)
That new EV Ferrari, the Luce, that has definitely not helped things either.

**Kyle Grieve** (2:15)
No, no doubt about that. Should we do it?

**Shawn O'Malley** (2:18)
Let's do it.

**SPEAKER_1** (2:22)
Since 2014, with more than 200 million downloads, we have interviewed the world's best investors, studied deeply the principles of value investing, and uncovered many compelling investment opportunities. We focus on understanding businesses and intrinsic value, investing accordingly, and sharing everything we learn with you.
This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your hosts, Shawn O'Malley and Kyle Grieve.

**Shawn O'Malley** (3:08)
If you've been listening to this show for a while, you know that there are two companies that we really like, and you can think of it as a double header. We covered Ferrari as a standalone stock, and the conclusion on Ferrari was pretty simple. We love the business, but we didn't necessarily love the valuation, at least not at that time. It was a little too rich for our value investing blood. But luckily for us, we have a wide audience of very intelligent listeners who like to point things out to us.
One of them guided us towards a name we'd never heard of before, and that was Exor. Exor just so happened to be Ferrari's largest shareholder, and as a holding company, it traded at a massive discount to the net asset value of its holdings, as I mentioned a moment ago. We were able to get Exor at about a 60% discount to its net asset value, which meant that in a sense, we got Ferrari's shares at the same discount proportionately. If you accept that premise, then well, this is one way to bypass the valuation concerns of investing in Ferrari entirely, and get that very high quality business at a much more attractive price.

**Kyle Grieve** (4:20)
Today, we aren't making a new pitch like we usually do. Today, we're going to update you on how the thesis has unfolded to hold ourselves accountable. We'll give you a primer on everything you need to know just so that you can follow along, even if you haven't yet heard our previous coverage of either Exor or Ferrari. Now, I want to do an episode like this just to show some of the conversations that we have in the background when deciding whether to do nothing with the business, maybe add to that position or ultimately exit it either partially or completely. Now, I'm really excited for this one because Shawn and Daniel did just a really, really good job covering both Exor and Ferrari. I'm getting my chance to really dive deep into the thesis that they already built for me and try to figure out whether it still stands or if things have fundamentally changed.