Daimler AG (XTER:DAI, Financial) was a top contributor for the first quarter as the German automotive manufacturer's share price soared on the announcement it would spin off a majority stake in Daimler Truck. In our view, this is momentous news that represents fundamental change by establishing two distinct companies—one, a pure-play premium car company, and the other, a global leader in trucks and buses. This transition should lead to increased accountability, allow for more agile decision-making and unlock value for shareholders. In addition to this announcement, Daimler released its full-year 2020 earnings report and the results were well above our and consensus expectations. Adjusted earnings improved dramatically in the fourth quarter and management was able to convert this into cash. As a result, the company outperformed expectations by generating more than EUR 8 billion of free cash flow. Management indicated that there would likely be "significant growth" in unit sales and that Mercedes-Benz would hit earnings margins of 8-10% in 2021. We anticipate that the global vehicle manufacturer will continue to do well throughout the year, thanks to successful cost discipline, ongoing improvement in underlying demand, and important product launches of both internal combustion engine and battery electric vehicles. We believe Daimler's management team is executing well and demonstrating strong commitment to shareholder value creation.
From David Herro (Trades, Portfolio) and Bill Nygren (Trades, Portfolio)'s Oakmark Global Select Fund first-quarter 2021 commentary.
