While speaking at last week’s Delivering Alpha conference, Jim Chanos presented his new short target, Caterpillar Inc. (NYSE:CAT). At the same conference he also hinted that he was shorting a couple of other struggling European automakers as well but did not name any companies, now we are exclusively bringing to you Chanos’ other short in the auto industrial sector.
Chanos Shorts Fiat
Kynikos Associates, Chanos’ hedge fund, has established a 0.5% short in Fiat S.p.A. (OTCMKTS:FIATY), the Italian car maker which is famous for owning expensive brands, Ferrari and Maserati . He is hedging his negative bets in Fiat against long in the German automaker, Volkswagen AG (FRA:VOW) (ETR:VOW) (ETR:VOW3). Chanos shared that he is long Volkswagen AG at the same conference in which he declined to name the European companies he was shorting. Several other noted hedge fund managers are also bullish on VW, including Dan Loeb, Crispin Odey and some smaller hedge funds.
Declining Sales In European Auto Industry
Hedge funds have been betting against some European automakers in the past months. Auto sales in Europe recently plummeted to their lowest levels in two decades with each major company posting decreased number of sales. Interestingly Chanos pitched the “don’t go long” Fiat idea in late 2009 as well. At that time he was also bearish on Ford Motor Company (NYSE:F). Chanos has been in and out of European auto shorts in the last five years.
Hedge funds short Fiat and other automakers
We have mentioned that other hedge funds are also short Fiat S.p.A. (OTCMKTS:FIATY), other than the new position from Chanos, Marshall Wace, Adage Capital and Pelham Long Short Master Fund also have bet against the Ferrari and Maserati maker. The largest short is held by Pelham which has a 0.7% position in Fiat’s outstanding shares.
So what is troubling Fiat S.p.A. (OTCMKTS:FIATY) currently that has spiked Chanos’ short interest. Most importantly, like other European automakers Fiat,which also has a majority stake in Chrysler, is also suffering from declining profits. Fiat’s sales in Europe fell 11% in May’s autosales report. %Earlier Fiat reported a 2% decline in Q1 revenue and a huge 23% fall in profits.
Fiat Industrial SpA (BIT:FI), the manufacturer of heavy machinery and vehicles, reported a 22% drop in profits owing to reduced demand for trucks and construction vehicles whereas the revenue came in flat.
Peugeot SA (OTCMKTS:PEUGY) (EPA:UG) is another automaker that is frequently shorted by hedge funds. D.E Shaw has a 2% short whereas Odey Asset Management has 1.42% short in the French company.
Fiat has gained almost 58% in its shares this year so far.