Value Investor Daily #13

Hertz Sells EVs, Best Places to Work Outperform the Market, Paramount Is Going to Auction

In Today's Edition:

White House Allocates $623 Million to EV Stations

The White House will provide $623 million in grants to expand the US electric vehicle charging infrastructure. This funding will install 7,500 new charge ports, with a focus on rural and low- and moderate-income areas.

The grants will also support hydrogen fueling stations for vans and trucks. The funding comes from a total of $7.5 billion allocated for charging and greener fueling in the Bipartisan Infrastructure Law.

The aim is to accelerate transportation electrification and reduce greenhouse gas emissions, which account for around 30% of US emissions. The US currently has almost 161,000 charging ports but will need 1.2 million by 2030 to meet the growing demand for EVs.

The new funding will support community projects and develop a dense network of chargers along US highways, which is crucial for boosting EV adoption.

This comes amidst news Hertz, the rental car company currently undergoing bankruptcy proceedings, has announced that it will sell around 20,000 of its electric vehicles (EVs) in the US to buy gasoline-powered cars instead.

Hertz had previously planned to purchase 175,000 EVs from General Motors (GM) as part of its move to diversify its fleet.

However, the company cited expenses related to damage and collision and lower-than-expected demand for EVs as the reasons for its shift. The sale of the EVs is expected to reduce Hertz's 'damage expense,' and the move to petrol-powered vehicles is projected to improve its net income through 2025.

Hertz spokesperson Lauren Luster did not provide further information on the EV sales or the remaining EVs within the rental fleet. Last year, Hertz ordered 100,000 Teslas.

The impact of the shift on GM remains uncertain. Hertz and GM signed a partnership agreement in 2022 for the rental company to purchase up to 175,000 EVs by 2027.

At the time, it was reportedly the largest EV expansion by a fleet customer.

General Motors (GM) quick stats:

  • Trades for just 4x cash flow.

  • ROIC is 4.74%.

  • Revenues are expected to grow 5.49% over the next 5 years

  • Total debt is $118B vs. $12B of free cash flow.

Tesla (TSLA) quick stats:

  • 194x P/FCF ratio

  • ROIC is 16.9%

  • Projected revenue growth next 5 years is 21%

  • $4.39 billion total debt vs. $3.71 billion free cash flow

Hertz (HTZ) quick stats:

  • $18.1B total debt

  • -$2.68B free cash flow

Wolverine World Wide Sells Sperry Shoes

  • American footwear and apparel company Wolverine World Wide (WWW) has sold Sperry to the brand management firm Authentic Brands Group.

  • Wolverine will generate $130m from the deal, which Wolverine World Wide has stated will be used to pay down debt.

  • Wolverine originally acquired Sperry, which focuses on boat shoes and loafers, 2012 as part of a $1.23bn deal with Payless, which included other brands.

  • Sperry quarterly sales had recently fallen 41.4% YoY.

  • Wolverine World Wide (WWW) trades for 2.5x cash flow

  • Debt is $1.2B vs. $286M of free cash flow

  • The stock is down 78% from its peak

  • But for a good reason: the acquisitions in 2012 didn’t pay off, and sales have been stagnant for ten years.

Bain & Company Named Best Place to Work

Bain & Company has been named the best place to work in 2024, according to job review site Glassdoor.

The global consultancy firm received a rating of 4.8 out of 5, making it the overall winner of Glassdoor's 100 Best Places to Work 2024 list. This is the sixth time Bain & Company has claimed the top spot.

Here are the top 10:

  1. Bain & Company


  3. ServiceNow

  4. MathWorks

  5. Procore Technologies

  6. In-N-Out Burger

  7. VMware

  8. Deltek

  9. 2020 Companies

  10. Fidelity Investments

Why does it matter for investors?

Apparently, creating a happy workplace for employees is great for your stock price.

Companies in the “Great Places To Work” index outperformed the Russel 1000 index by 3.36x.

Of course, there is likely massive backward-looking selection bias here because the most profitable companies can afford more pay and benefits and are, almost by definition, more innovative and exciting workplaces.

However, it could still be a great starting point for ideas, as they will naturally attract the best talent by being voted the best places to work.

Paramount to Be Sold at Auction

National Amusements, which controls 77% of Paramount (PARA), the film and television studio, may soon be sold at auction to the highest bidder.

Shari Redstone, the majority owner, reportedly plans to sell her controlling stake in National Amusements through an auction process.

The potential sale comes as Warner Bros. Discovery and Skydance Media are in talks to buy majority control. Paramount Global CEO Bob Bakish and Warner Bros. Discovery CEO David Zaslav recently met to discuss a possible merger. However, the talks are still in the early stages and may now involve multiple investment firms as competing bidders.

Paramount’s cable TV networks, which include Nickelodeon, Comedy Central, and MTV, would be controlled by any new owner of National Amusements.

Paramount's streaming service, Paramount+, is also struggling to achieve profitability.

Warren Buffett’s Berkshire Hathaway owns $1.2 billion worth of Paramount stock. Free cash flow is negative. It trades for just .4x book value. $19B of its assets are Goodwill and Intangibles, which may or may not get fully valued at auction.

Morningstar: Kellogg is 50% Undervalued

The stock of WK Kellogg (KLG), the domestic cereal arm of the former Kellogg, is undervalued, according to Morningstar. It was spun off in June of 2022.

While the market is overlooking WK Kellogg due to its exposure to a competitively challenged industry and its post-spinoff lack of participation in the growth-oriented global snacking business, the company is focused on upgrading its outdated supply chain, which is expected to enhance operational efficiencies and profitability.

Management is targeting midteen EBITDA margins by 2026, up from 2.5% today.

As WK Kellogg benefits from optimizing its fixed assets, it is likely to continue prioritizing its dividend and returning excess cash to shareholders. It has a 4% dividend yield.

However, there are real risks. WK Kellogg lacks a durable competitive edge in the North American cereal market due to intense competition and the availability of alternative breakfast options.

Additionally, the company faces risks such as fluctuating commodity costs and the potential challenges of entering adjacent categories in the future.

Thank you for reading this week—happy investing!

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