Adam Crocker presented his in-depth investment thesis on Peugeot (Paris: UG) at Best Ideas 2017.
Peugeot is an automotive manufacturer that has undergone changes not yet reflected in valuation. In recent years, the company 1) hired one of the industry’s best regarded leaders as CEO, 2) transformed its balance sheet from ~€20B net debt to ~€5B net cash, and 3) reversed ~€400m operating losses in FY13 into ~€3B operating profits LTM 6/30/16. Despite these improvements, the business trades near relative and absolute trough multiples of 3x EV/EBIT. This should eventually trend to historical averages of at least mid/high single digits as investors appreciate that the recent recovery is a reflection of sustainable changes to Peugeot’s business and not a cyclical aberration. Lastly, for the first time in its history, the Peugeot family is no longer a controlling shareholder (currently 14%) which increases the potential for being acquired. The combination of upgraded leadership, drastically improved fundamentals, low multiples and growing optionality appear to make Peugeot an attractive risk/reward.
About the instructor:
Adam Crocker, CFA is Founder and Chief Investment Officer of Logbook Investments, a process-focused hedge fund founded in 2016 and seeded by his prior employer. Prior to Logbook, Adam was a co-manager at Metropolitan Capital Advisors, a long/short equity fund founded in 1992. Prior to joining Metropolitan, he was an analyst at Morgan Stanley Investment Management conducting research on behalf of growth and value investment teams. He began his professional career in Leveraged Finance investment banking at JPMorgan. Adam is a 2005 graduate of the Value Investing Program at Columbia Business School and has an undergraduate degree in Economics from Columbia University.
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