The Intrinsic Value Podcast discusses Exor N.V., a Dutch-domiciled holding company with deep Italian roots, as a compelling way to gain exposure to Ferrari at a significant discount. While Ferrari itself is an expensive stock, Exor, controlled by the descendants of Fiat founder Giovanni Agnelli, trades at an approximate 60% discount to its Net Asset Value (NAV). This implies investors can acquire $1 of assets for $0.40, with Exor's 20% stake in Ferrari alone being worth more than Exor's entire market capitalization.
Exor's portfolio is eclectic and contributes to this conglomerate discount. Key holdings include Ferrari (20% of shares, 30% voting rights), Stellantis (parent of Fiat, Jeep, Chrysler, Dodge), CNH Industrial (agricultural and construction machinery), Philips (healthcare technology), Juventus football club, The Economist, luxury shoemaker Christian Louboutin, and various venture capital investments. This diverse mix makes it challenging for the market to value and creates a perception of lacking a clear, focused investment strategy.
The hosts identify several reasons for Exor's steep discount. The sheer complexity of valuing dozens of different public and private businesses leads to a conglomerate discount. There's also a potential misalignment of incentives due to the Agnelli family's significant control (86% of voting rights vs. 55% economic ownership). Furthermore, Exor's sale of €3 billion of Ferrari shares in March 2024, though strategically timed with Ferrari's high valuation, intensified fears that Exor might dilute its highest-quality asset to fund riskier ventures, widening the discount. Historical frictional costs, such as an €850 million tax settlement for moving its legal headquarters to the Netherlands, also highlight the complexities and potential drains on NAV.
Despite these concerns, Exor presents a compelling case. John Elkin, the current CEO, has a strong track record, leading the company through the financial crisis and overseeing successful turnarounds (like Fiat) and strategic maneuvers (like the Ferrari spin-off and Stellantis merger). Exor's NAV has compounded impressively, outperforming the MSCI World Index by 600 basis points annually over the last decade. Elkin has also demonstrated shareholder-friendly behavior through significant, accretive share buybacks using a "reverse Dutch auction" method. The company boasts a strong balance sheet with an A- credit rating, and recent accounting changes (IFRS 10) have increased transparency, better reflecting Exor's role as a passive investment holding company. The quality of Exor's underlying assets and brand management is further validated by its partnership with renowned designer Sir Jony Ive on Ferrari and other luxury projects.
The hosts' valuation models indicate substantial upside. Even in a "bear case" scenario with below-average NAV compounding and a persistent 50% discount, an annual return of 10% is projected. A "base case" suggests 16% annual returns, and a "bull case" with a more normalized 30% discount projects 20% annual returns. This significant margin of safety makes the investment attractive despite the lack of a specific short-term catalyst to close the discount.
Acknowledging the "no free lunch" principle and the potential for the discount to persist, the hosts decide to add Exor as a 5-7% position to their portfolio. Their primary exit trigger would be a substantial reduction in Exor's Ferrari stake used to fund less attractive investments, as the Ferrari exposure is central to the investment thesis. The opportunity is framed as a protected downside value play with significant upside potential due to the deep undervaluation relative to its high-quality underlying assets.