Through TheFLY's Eyes: DaimlerChrysler
from Joseph Lazzaro of Theflyonthewall.com
DaimlerChrysler Plays The China Card
Just call it an eastern hemisphere hedge for DaimlerChrysler (DCX).
DaimlerChrysler announced Thursday that it plans to buy 297M shares of China’s Beiqi Foton Motor Co. LTD at 2.75 yuan per share for 816.7M yuan or about $104M. Those 297M shares would represent a 24% stake in Beiqi Foton
Beiqi is China’s largest truckmaker, and one analyst/economist who follows European / Asia business and trade flows says Daimler’s investment is both a hedge and a potential solid-win tactic.
“You have to like this move,” said David Chandler, analyst/economist with the Econometrics Group. “Daimler gets a potential low-cost production source for medium and heavy trucks, while at the same time better-positioning itself in the promising Chinese truck market. There are always opportunity costs when you invest, but very rarely does a company get this type of hedge / market opportunity for $100M. It’s a bargain and a solid move.”
Chandler said Daimler trails General Motors (GM) is joint-venture deals with China-based companies, so the Beiqi deal represents progress against a major U.S. competitor, as well.
DaimlerChrysler’s shares traded slightly lower Thursday at mid-day, down 15c to $58.29. Meanwhile, General Motors was down 43c to $29.07 and Ford (F) had dipped 2c to $8.14.
Investment Analysis: The best way for the typical investor to play DaimlerChrysler? Investors who can tolerate a moderate level of risk should buy DCX now, in stages, over the next two weeks: 50% of your position today, 50% next week. Conservative investors – those who can tolerate only a low level of risk - should wait and see if DCX pulls back to $56. If it does, and bounces off $56, consider adding a small amount of shares to your portfolio.