Cantillon Deep Value · 21 October 2026 ★ United States ★ Track A

Strattec: the cash is real, the cheapness is not

A Milwaukee maker of car locks, latches and power doors, with no debt and a large cash pile, down 35% from its high after a weak outlook and a trade scare. The screen flagged it as cheap. This issue checks whether it is.

The Conclusion, Before Anything Else

Is it cheap on adjusted, normalised figures?	Members
Is the balance sheet safe enough?	Members
Do the accounts survive the forensic pass?	Members
Is there a catalyst with a clock?	Members
Is management aligned, and will value reach minorities?	Members
Is it liquid enough to enter and to leave?	Members
Does it clear the return hurdle for its tier?	Members
Do I hold it?	Members
Current action	Members

Eight questions, one action. The answers are members-only, because the answers are the report.

The Setup · A Clean Balance Sheet in a Dirty Tape

This is not a coverage desert in the classic sense. Strattec is a US company with SEC filings anyone can read. The mispricing case, if there is one, comes from size and mood. At a $241M market cap it sits below where most funds can bother, two analysts follow it, and the whole North American auto supply chain is being sold on two fears at once: Detroit is cutting production, and the trade deal that lets Mexican-made parts cross the border tariff-free was not renewed in its current form in July.

Strattec makes almost everything in Mexico. So the question is simple. Is the market throwing out a sound, cash-rich business with the bathwater, or pricing a real risk correctly?

1 · The Thesis Cheap + Good + Catalyst, Tested

The screen said this was cheap. On this year's profit, it is. Strattec just had its best operating year since fiscal 2021, holds a large pile of cash against no debt, has started buying back its own shares, and its executives bought stock with their own money in May. The work below asks the harder question: is it still cheap on the profit a normal year produces, and is the price already paying for the risk?

2 · The Business

Strattec makes the parts that let you into a car and keep it shut. Keys, locks and steering column locks; powered liftgates and sliding doors; door handles, made through a joint venture with ADAC Automotive; and latches. About 90% of sales go straight to the car makers, and three of them dominate: General Motors 27%, Ford 21% and Stellantis 16%, so 64% of the business rides on Detroit.

Four of its five plants and 85% of its 2,654 staff are in Mexico, in Juárez and León. That is why its costs move with the peso. A turnaround under chief executive Jennifer Slater has cut manufacturing headcount by 7%, automated part of assembly and pushed through price increases, and the result shows: gross margin rose from 15.0% to 16.5% in the fiscal year to June 2026, and operating profit rose for the third year running.

3 · Why It's Overlooked

Size, sector mood, and a quant downgrade. Two analysts cover it. Auto suppliers are out of favour across the board. On 6 October a quantitative rating service cut it to its lowest grade, which tends to trigger selling by funds that follow those ratings, and the stock fell through its 50-day and 200-day averages into oversold territory.

The fair criticism: some of this is not neglect at all. A thin-margin supplier with its factories in Mexico and its customers in Detroit should trade at a discount while the trade rules are unsettled. Section 4 takes that seriously.

4 · The Other Side The Bear Case, Argued Properly

The steelman short. This is a 4.6% operating margin business near the top of its range, priced on that year. Its three biggest customers are cutting North American output by about 6% in the year ahead, and management's own rule of thumb says each lost sales dollar takes 30 cents of profit with it. Over the last ten years its average operating margin was 2.8%, it lost money in two of them, and it has never earned much above its cost of capital for long. Most of what it makes is made in Mexico, the free-trade terms are open again, and if a tariff lands it pays first and argues with GM later. The cash is real, but management has said the cash goes to the business first and acquisitions second. Buybacks come third.

Who is selling, and are they stupid? Mostly momentum and ratings-driven money after the 6 October downgrade, and sector funds cutting auto exposure. Not insiders: there were no open-market insider sales in the last six months, and three insiders bought in May. The largest holder, the Gabelli group with 19.7%, has only made token sales. The sellers are not stupid, though. They are pricing a real production cut and a real trade risk.

The Variant Perception

The market believes Strattec is a low-margin supplier heading into a downturn. I believe the turnaround has lifted the margin floor, so the next bad year will be shallower than the last two. The gap closes only if fiscal 2027 proves it, with margins holding near 4% while volumes fall. Until then, this is a belief, not a mispricing.

Members Content

The Verified Numbers, the Targets, the Timing and the Size

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What Happens Next

Publishing an idea starts the coverage, it does not end it. For this name: an earnings note within 72 hours of every result, an update on each checkpoint date whether or not anything happened, a timing alert within 24 hours if the gate flips, and an exit note if the thesis breaks, published whether or not it lost money. Every position is tracked in the open in the Deep Value Portfolio under a published track record method.

Legend

Adjusted net cash: cash and investments minus total debt and minus anything that is not genuinely free (restricted cash, customer deposits, pension deficits, operating cash needs). EV (enterprise value): market value minus adjusted net cash. What you actually pay for the business. EV/EBIT: enterprise value divided by operating profit, on normalised earnings. Normalised: earnings adjusted to a mid-cycle level rather than a trough or a peak. ROIC: return on invested capital, how much profit the business makes on the money tied up in it. Expected IRR: the probability-weighted annual return across the three scenarios. Timing gate: whether the chart says buy now, start partial, or wait. IVT: Institutional Volume Terminal, the chart overlay used in section 10. AVWAP: anchored volume-weighted average price, roughly the average price institutions have paid since a chosen point. JV minority: the 49% of the ADAC joint venture Strattec does not own; its claim is added to enterprise value. Decremental margin: the share of each lost sales dollar that comes off profit. USMCA: the US, Mexico and Canada trade agreement that lets qualifying parts cross the border without tariffs.

Cantillon Deep Value is research and education, not investment advice. Nothing here is a recommendation to buy or sell any security. Thesis-critical figures are verified against primary filings before publication and the verification log is shown in section 5; figures that could not be verified are labelled as estimates. Disclosure: the author holds no position in Strattec, did not hold one before publication, and will not trade it within three trading days of publication. No trading takes place in a covered name within three trading days either side of publication. No compensation is received from any covered company. Auto supply chains carry tariff and currency risk that can move faster than filings. Do your own diligence. On companies this size, the filings are the final word.