ROBERT KLEINSCHMIDT
PRESIDENT AND CIO
PORTFOLIO MANAGER
TOCQUEVILLE ASSET MANAGEMENT

COMPANY: Tata Motors, Inc.
TICKER: TTM (NYSE)
PRICE: $16.31
52 WEEK RANGE: $10.27–$21.99
MARKET CAPITALIZATION: $6.197 billion

Robert Kleinschmidt is the president and chief investment officer at Tocqueville Asset Management. He is also the portfolio manager of the Tocqueville Fund, which ranked no. 1 for five-year returns by the leading research firm Morningstar. Mr. Kleinschmidt spoke to Elisa Mala of The New York Sun about why this low-cost producer might become a highly coveted stock.

What does the company do?

Tata Motors is primarily a truck and automobile manufacturer in India. It’s also something of a conglomerate.

Why do you like this company?

The short answer: It is the lowest cost auto and truck manufacturer in the world, bar none, with a dominant market share in the world’s fastest or second-fastest growing market. Tata Motors is talking about making a car in a couple of years that they’ll be able to sell to the Indian public for $2,000 a piece. That’s dinner for four at Nobu. They already make a car that’s only $5,000.

In India, there are all kinds of vehicles on the road. They can include scooters and trucks and camels and cow carts and the occasional horse, though you don’t see many of those. Then you see cars, but you don’t see as many as you would think, so there’s a clear coming automotive boom in India. Nobody is better positioned to capitalize on that than Tata Motors.

Do they have any competitors?

There are some competitors, but none that can produce at that cost (and therefore at that price). In the truck market, there are virtually no major competitors.You can’t really import a car into India and make any money because you can’t sell it at a low enough price.

What are the risks associated with this stock?

The biggest risk is not company-specific; it’s more macro-specific. If the Indian economy or the world economy slows down significantly, then these emerging economies are more likely to be cyclical. The emerging economies probably won’t slow down as much, but they will be more volatile. That being said, we’re coming in at a point when there’s already been a 30% decline in the stock and the Indian market, so it represents a good entry point.

Are there any sector risks?

That would be a fair question if this were a U.S. manufacturer. I don’t think there’s a sector risk associated with the Indian automotive industry. The only one that would come to mind is international competition, and I think we’re insulated from that because Tata Motors is the lowest-cost producer.

What type of investor is this stock best suited for?

I don’t recommend anything for the short-term investor. I don’t think there’s such a thing as a short-term investor. The people who are buying stocks on the basis of trying to make a quick buck are in the wrong business. It’s best suited for the long-term investor with a three-or five-year horizon.