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Strategies & Market Trends : Value Investing

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To: Sergio H who wrote (48516)	6/30/2012 12:01:48 PM
From: Spekulatius	1 Recommendation Read Replies (1) of 78568

Re BMW.DE /BMW3.DE - the general perception in Germany (right or wrong) is that the car makers are at peak earnings and they are priced as such. I personally like BMW3.DE most and they are trading below tangible book right now - the preferred have a huge discount to BMW.DE that is not justified, in particular since the Quandt family calls the shots anyways. I have looked at the GM pension deal briefly. My impression is that GM paid an extra 3-4B$ to Prudential to get rid off 20B$ in gross (not net!) liability and convert the pension into a PRU annuity basically. This makes sense PRU does not sell 8% annuities (the assumed rate of return in most pension plans) so extra funds are needed to make up for the shortfall. I don't know the gross liabilty for GM's pension plant but it has to be in the hundred of billion $, so doing a PRU like deal will require a lot of cash outlays. Add this to the EV ( i have not done this) and decide yourself if GM is still cheap. Killing the pension for new employees just helps not to perpetuate the problem, but GM still has to deal with it for 20-30 years.

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