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Bendahan: ‘dieselgate’ is not just a VW issue

Star French fund manager Eric Bendahan shuns car makers for their limited growth prospects and increased scrutiny they face after the Volkswagen emissions scandal.

Bendahan: ‘dieselgate’ is not just a VW issue

Star French fund manager Eric Bendahan is shunning car makers as he says they have reached their growth potential and face increased scrutiny after the Volkswagen emissions scandal two years ago.

The Citywire AA-rated manager, who runs the €2.4 billion Eleva European Selection fund, said the French attitude to penalising businesses which have committed infractions is now much more aggressive than it was.

‘Autos do look cheap, but they are cheap for a reason. First we find that the auto markets - especially in the US and in Europe - are at peak or close to peak.

'There is not going to be a lot of growth in vehicles, as in some places it has been artificially boosted by ultra-low interest rates,’ Bendahan said.

‘Auto makers need to invest a lot of money in electrification. I don't think there is going to be a lot of cash-flow delivered. I don’t think “dieselgate” is just a Volkswagen issue.  

‘I think investors, especially in French companies, underestimate the risk that they will have in paying significant penalties,’ he added.

French carmaker Renault (RNA.PAR) was one of the largest detractors from the fund in 2017 and Bendahan, who founded Eleva Capital in London after leaving Syz Asset Management, previously held car producer Peugeot (UG.PAR). This summer he began to relocate the firm to Paris, having decided to focus the business more on the French stock market.

Fantastic companies

Bendahan, who began his career at AXA Investment Managers, said an alternative car industry play was to invest in tyre makers, as they will still be needed in electric vehicles and driverless cars.

The second largest holding in the fund is German tyre maker Continental (CON.GR), which makes up 3.5% of his fund.

‘We like the tyre industry much more than we do automakers. Auto sales have been very good over the last seven years and replacement tyre demand will be good for the next seven.

‘Tyre makers trade at a premium to the sector, but there are excellent companies at 11 times earnings, which is a steal in my view,’ Bendahan said.

‘I use the fact that the auto makers are cheap to invest in tyre businesses like Continental, which are fantastic companies and have great technology. They will benefit from electrification and from automated vehicles.’

Since its launch in January 2015 the Eleva European Selection fund has returned 26.6% in euro terms. This compares to a rise of 15.7% compared to its Citywire-assigned benchmark, the FTSE World Europe TR, over the same time frame.

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by Michelle McGagh on Jun 22, 2018 at 14:57

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