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17 January, 2020

Football, meat pies, kangaroos and... that's it.
Scott Phillips

Chief Investment Officer, The Motley Fool

One of my stronger childhood memories is of one particular Sunday morning.

I was at my paternal grandparents’ house in Sydney’s eastern suburbs (the location is, incidentally, why my grandfather, my father and -- as an inheritance -- my son and I are all Roosters fans.)

On that particular morning I was in front of an old (small) telly, and the time must have been 9.30am or so. I had the insert of the Sunday Tele spread out in front of me.

No, it wasn’t the comics.

And no, thankfully, it wasn’t the form guide, either!

It was a liftout produced very specifically for that weekend in October -- the day of the James Hardie 1000.

If you’re of a certain age, the Hardie 1000 should ring a bell. If you’re over that age, you might remember it initially as the Hardie-Ferodo 500, when such things were measured in miles.

These days, it’s the Supercheap 1000 (I think) and is, of course, the premier race of the Supercar series.

The Supercars were once the V8 Supercars, but, well, that engine is on the way out.

So are the two staple models of the genre; the Holden Commodore and the Ford Falcon.

Back in those days, I was a Peter Brock fan. I can’t remember why, but probably because our family car was a Holden Kingswood station wagon, and Peter Perfect was the man.

I wasn’t even particularly a motor racing fan -- Formula 1 left me cold, and I didn’t even watch the rest of the Touring Car series (as it was called) during the year

It was just -- and always -- Bathurst.

Maybe it’s the long-term investor in me. The idea of an all-day endurance race, with the twists and turns (literally and metaphorically) that such a race entailed. The driver changes, pit stops, safety cars (in later years), prangs, brake failures… and the sheer ability to see it though to kilometre 1000.

Was there anything cooler than Brocky, talking to the commentators on Racecam, casually flying down Conrod Straight, wearing the open face helmet and with one hand on the steering wheel, as if it was a regular Sunday drive?

(And yes, though tribal loyalties generally forbid it, I should in all fairness also mention the greats of the Blue Oval, including Dick Johnson, Alan Moffatt and John Bowe -- and a hat tip to Tony Longhurst in the B&H BMW!)

Kids these days wouldn’t believe it, but they drove cars with manual gearboxes, too -- and not just of the ‘up/down’ variety, but ones that had slots for all of the gears. Prehistoric, right?

Ah, those were the days!

I was reminded of all that when I saw a -- I was going to say ‘newspaper article’, but that dates me almost as much as my Bathurst tale -- story online about the best selling cars of 2019 from Cars Guide.

It tells a helluva story in lots of different ways, but -- and Holden fans avert your eyes -- the really sad story was that of the once proud Holden Lion.

No Holdens in the Top 10 cars sold!

One one -- the Colorado at #15 -- in the top 50.

The second-highest selling Holden -- at #59 -- was the now-defunct Commodore.

In the jungle, the auto jungle, the Lion weeps tonight!

The once mighty brand -- Australia’s Car -- is on its knees.

Football, meat pies, kangaroos and… it’s almost hard to remember. Harder to admit.

Holdens are no longer made in Australia.

Worse, scarcely more are sold in Australia, either. And those that are… well, they’re conveniently rebadged overseas models.

The really bad news? If and when Holden’s parent, General Motors, gets around to looking closely at an orphan brand…

...in a tiny market…

...on the other side of the world…

It’s going to swing the axe.

Sad, but true.

How does GM, as a global automaker, justify the teams of people working on an Australia-only brand, especially with sales suffering so badly?

The sad reality is that, over the medium- and long-term, it’s going to get more value from leveraging its global brands.

I’m no car expert, but the vast bulk of Holdens selling in Australia these days are essentially Chevrolet models anyway. 

How many Aussies are buying the Holden Trax because it’s a Holden? How many fewer would buy the Chevy Trax instead? 

None? Maybe one?

GM must know it.

The team at Holden must, deep down, know it.

I don’t doubt that they’re wonderful people, working hard, to deliver the best cars -- and best results -- they can.

But they’re pushing a -- well -- broken down Commodore uphill.

The change will be painful. But, despite their best efforts, it’s all-but inevitable.

Meanwhile, of course, electric-vehicle manufacturer Tesla is now apparently worth more than GM and Ford… combined.

Just let that sink in for a second.

Now, I’m the first to say we shouldn’t take our real world views solely from the stock market. Enron and BondCorp were once worth a fortune, too!

Tesla has to sell a helluva lot more cars to justify its current valuation. And at a margin that the big boys can’t even dream about.

That said, if anyone can do it, it might just be Tesla CEO Elon Musk.

My guess is that the market is too pessimistic about the incumbents and too optimistic about Tesla, but it’s just a guess. I don’t have any money where my mouth is on this one, because I just don’t have enough confidence in that outlook, either way.

Tesla has to climb a mountain. No, not The Mountain (That’s Bathurst’s Mt. Panorama, if you’re wondering). But a mountain nonetheless.

And the Detroit-and-Tokyo set still hasn't come to grips with the ‘car-as-gadget’ revolution that Tesla is bringing to the table, to say nothing of the transition away from the internal combustion engine.

What I do know is two things:

First, no matter my rose-coloured recollections of the past, or how I’d like the present to be, I have to invest according to reality. I loved the old Commodore. I owned a couple in the past. I’d love to see Holden topping the sales charts once again. 

But that ship has sailed. And it’s not coming back.

An investor has to look, clear-eyed, at the future, and not dwell on the past.

Second, the future is uncertain. You’ll never get a crystal ball. You have to work with probabilities and best guesses. If that sounds unusual for an investment advisor, that’s because it’s an uncomfortable truth. Most in my industry go for the easy sell: certainty. Or at least, avoiding mentioning doubt.

No-one knows what the future will bring for the car industry. And even if you did, none of those people would know the eventual specific winners and losers. Maybe Tesla sweeps all before it. Maybe it just ushers in a new engine, and the big boys adapt in time to maintain their position, and Tesla fades away.

I don’t know. Nor do you. Not for sure, anyway.

The job of the investor is to place educated bets. And enough of them -- with attractive enough odds -- that the winners more than cover the losers.

I can’t be more clear: if you’re being sold some version of ‘certainty’, you’re being sold a pup. In that case either your adviser is using inside information, is a time-traveller, or is lying -- to you and/or themselves.

Here’s how to deal with uncertainty:

1. Take a clear-eyed view of the future. Not what you wish was true, but what is likely to be true. That applies equally to the ‘rose-coloured nostalgia, holding onto the past’ crew as to the ‘I hope the future is X’ group.

2. Look for situations in which the probability -- and the payoff -- are in your favour; and

3. Don’t be afraid to put ideas in the ‘too hard’ pile. Feel like a cop-out? Tell that to Warren Buffett, who even brags about the size of his ‘too hard’ pile. 

And keep learning. The more you learn about business, the better you’ll get. Ditto, the length of time you spend investing.

You’ll make mistakes. I have, and I’ll continue to.

Arrogance -- and certainty -- is the enemy of great investing returns.

Peter Brock is sadly no longer with us. Nor is the Commodore or the V8 Supercars.

But the future is coming, and it’s exciting.

Invest accordingly.

(Oh, but if anyone wants to get rid of their old EH Holden or HZ Kingswood for cents on the dollar, get in touch. I’d be happy to take it off your hands.)
Fool on!


Scott Phillips
Chief Investment Officer
Motley Fool Australia
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This article contains general investment advice only (under AFSL 400691). All data as of January 17, 2020. Authorised by Scott Phillips. You can follow Scott on TwitterFacebook and Instagram. For more information about The Motley Fool see our Financial Services Guide. All returns cited are hypothetical and based on the percentage change between the stock price at the time of recommendation and the current or sell price (if the position has been closed) at the time of publication. Brokerage, taxes and any other associated costs are not taken into account. Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns. Performance figures are not intended to be a forecast and The Motley Fool does not guarantee the performance of, or returns on any investment. Any money back guarantee is strictly limited to the subscription price paid for the product.
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