CBD: Undervalued Latin American Holding Company With Catalyst

Amit Wadhwaney of Moerus Capital Management presented his investment thesis on Companhia Brasileira de Distribuicao SA (Brazil: PCAR4, US: CBD) at Best Ideas 2023.

Thesis summary:

CBD is best known for its flagship brand, Grupo Pão de Açúcar (GPA), a Brazilian grocer-led retail business, which includes grocery stores, convenience stores, and gas stations, as well as significant e-commerce operations.

CBD is also the dominant shareholder of Grupo Éxito (Exito), a listed Colombian food-led retailer, owning over 96% of the shares outstanding. In addition to its controlling stake in Exito, CBD is also a large shareholder (owning a 34% stake) of Cnova N.V., a French e-commerce retailer.

In total, across its subsidiaries, CBD has a network encompassing 1,500+ stores and e-commerce and brick and mortar retail operations across five countries.

A perceived lower growth profile following a 2021 spinoff of the fast-growing Assai Cash & Carry business, the challenging macroeconomic and political environment in Brazil and Colombia, and the corporate complexity of an entity that has assets in five countries across three publicly listed entities, have resulted in subdued interest from investors in owning CBD shares. This has contributed to a stock that Amit believes is meaningfully undervalued.

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About the instructor:

Amit Wadhwaney is a Portfolio Manager and Co-Founding Partner at Moerus Capital Management LLC, and the founding manager of the Moerus Worldwide Value Fund. Mr. Wadhwaney has over 30 years of experience researching and analyzing investment opportunities in developed, emerging, and frontier markets worldwide, and has managed global investment portfolios since 1996. Prior to founding Moerus, Mr. Wadhwaney was a Portfolio Manager and Partner at Third Avenue Management LLC. Mr. Wadhwaney founded the international business at Third Avenue and was the founding manager of the Third Avenue Global Value Fund, LP, the Third Avenue Emerging Markets Fund, LP, and the Third Avenue International Value Fund. Earlier in his career, Mr. Wadhwaney was first a securities analyst, and then Director of Research at M.J. Whitman LLC, a New York-based broker-dealer. Prior to joining M.J. Whitman, Mr. Wadhwaney was a paper and forest products analyst at Bunting Warburg, a Canadian brokerage firm. He began his career at Domtar, a Canadian forest products company. Mr. Wadhwaney holds an M.B.A. in Finance from The University of Chicago. He also holds a B.A. with honors and an M.A. in Economics from Concordia University; at Concordia, he was awarded the Sun Life Prize and the Concordia University Fellow in Economics, and he subsequently taught economics classes there. He also holds B.S. degrees in Chemical Engineering and Mathematics from the University of Minnesota.

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