BMW missed our estimates on both the top line and EBIT. Revenue for Q413 came in at €20.2bln and we were forecasting a figure of €21.5bln. For EBIT we were forecasting €2.2bln and the company reported €1.95bln.

However, taking a more positive tone, management see a further increase in sales in 2014. Expenses are not likely to fall but this is due to more expenditure on new technologies and improve the efficiency of the brand.

Conclusion – we continue to like BMW and keep it as a core holding in the fund. It continues to generate positive margins in the luxury automotive industry and it is apparent when compared to Mercedes. Although Daimler shares are performing well, margins are much lower than those achieved by BMW. (Mercedes reported margins of 6.2% whereas BMW reported margins of 9.4% in 2013).

Our top pick in the auto industry remains Volkswagen because:

• Volkswagen is benefitting positivity from its Audi brand as for the first time as Audi sold more cars than other luxury autos.

• Margins achieved by Audi are better (10.1%) than that of Daimler (6.2%)

• Also Volkswagen shares today are up after management announced that the company may sell more than 10 million vehicles in 2014, four years earlier than planned through the introduction of new models in a strategy to overtake Toyota as the industry leader.

Conclusion: Volkswagen remains a core holding in the equity fund and we suggest to add to portfolios.


kristian camenzuli