The Little Book of Investing Like the Pros

Post-Mortem: Delphi Automotive

Throughout the book, we used Delphi Automotive as a case study to illustrate how our 5-step process can be employed to source, due diligence, value, and ultimately manage stock positions. We took you back in time to the decision facing investors in November 2011 when Delphi was going public.

We then walked you through the tremendous success of the ensuing years culminating in the December 2017 spin-off. During this time period, investors were rewarded with a nearly five-fold return. By comparison, over the same period peer auto suppliers and the S&P 500 roughly doubled (see Exhibit PM.1).

EXHIBIT PM.1 Delphi Share Price vs. Auto Suppliers & S&P 500

(indexed to 100)

The Delphi investment decision at IPO relied upon multiple drivers, perhaps best summed up by the opportunity to buy secular growth at a cyclical price. The global auto market recovery was in its early stages and Delphi had a powerful secular story centered on “Safe, Green and Connected,” as well as a compelling growth opportunity in China. All of this was supported by a global best-cost footprint and a highly active Board and management team driven to create shareholder value. This created the opportunity for numerous catalysts, most notably earnings beats, share buybacks, and value-enhancing M&A.

As the share price performance clearly demonstrates, the seeds of the core thesis ...