Autostrada & Italian stocks – lessons learned ?

Nate Tobik from Oddball made the following comment regarding the “Autostrada Italian job“:

I own one Italian stock and stories like this unfortunately seem too common with Italian companies.
I think I actually fear the lack of Italian corporate governance more than the lack of shareholder rights in Japan. At least in Japan management is quite conservative, in Italy companies are run like little fiefdoms.
The more items I read like this the more I consider just liquidating my position and watching Italy from afar for now.

In the particular case of Autostrada however, I actually have a very different opinion.

Yes, I had to liquidate the position with a loss, but let’s look at the facts:

1. As quoted in the original post, the information that the majority shareholder had bought the first part of Impegrilo and might require Autostrada to buy the shares was available already in Decemeber, however not at Autostrada’s homepage but at Fondiaria’s homepage

2. It was also clear that Autostrada wouldn’t have the money to do this and might need a capital increase to finance this

3. However, not only I was suprised, but a lot of other market participants as well, as the loss of now almost 20% in the stock shows

So clearly, one conclusion would be that Italian Governance sucks and you should keep away from those stocks.

Another conclcusion however could be: In the Italian stock market, existing information seems not to be fully valued into share prices. So we clearly see here some inefficiencies. In this case it was negative information, but as well it could be positive information (see the sale of the LatAm sub at SIAS).

So my conclusion is slightly different:

A) Yes, there are corporate governance issues in Italy
B) However there are also market inefficencies which could (and should) be exploited
C) However, this reuqires an “active” approach, among others searching for ALL available information

For me, this experience is rather an even bigger motivation to research GIPSI (or PIIGS) stock in the future. In my expereince, inefficient markets provide much better oppoertunities than highly efficient ones.

4 comments

  • MMI agree with you fully.

    Italy is full of great companies sold down for no company specific reason but you have to big a bit and it helps if you have friends in Italy you can bounce ideas off.

    Google translate is a great resource, I use it all the time for the under valued French companies I am finding a lot of at the moment.

  • Hi Nate,

    I don’t think you have to be fluent in every language to invest in those shares.

    I personally speak some other European language but normally I don’t have all the business vocabulary available.

    Google translate makes a lot of things easier.

    Interestingly, in countires like Italy, Spain or even France only very few people seem to blog about stocks. Also there are very few investment boards etc.

    However this increases the chances for the dilligent investor.

    MMI

  • Thanks for the post, really interesting thoughts. I like your way of looking at it that the Italian market actually offers more opportunity due to the non-centralization of information.

    I guess the next question is how accessible is this information to a non-Italian speaking investor? Did you need to search Italian news sources to find the information?

    I’m a typical American in the sense that I can really only speak English. I can slowly (emphasis on slowly) read French, but that’s it. It seems most Europeans are fluent in four or five languages without much of a problem. I think the Italian inefficient market information edge really goes to someone who can communicate in Italian.

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