Alex Roepers谈两宗深度价值特殊机会：$DCH与$NOMD

All right, hello and welcome to yet another value podcast. I'm your host Andrew Walker. Today, we're going to have an interview with Alex Roepers from Atlantic Investment Management. Alex has a great background in investing, activism, special situations, all that sort of stuff. We're going to talk about 2 of the more interesting stocks that I've been following recently. I have a position in both of them, and I'm always on the verge of doing a write-up on both of them.

They have some of the dark-arts angles that I've been really interested in recently, in terms of management teams signaling that they think there's an inflection or that the stock is undervalued through some dark-arts activities. The stocks are Dauch, DCH, and Nomad Foods, NOMD. We're going to talk about them for almost an hour, and you're going to hear why Alex and I think—and I think you should think, too—that these stocks are so interesting and undervalued.

They are very, very cheap, and as value investors have learned over the past 15 years, cheap does not always equal alpha. But I hope there will be some here, but that's not investing advice. See the disclaimer in the show notes. See the disclaimer at the end of the podcast. Uh, we're going to get to the podcast with Alex in a second, but first a word from our sponsors. This podcast is sponsored by AlphaSense and more specifically my upcoming AI webinar with AlphaSense. Look, the AI landscape is crazy if you're an investor. It's crowded, it's confusing, everyone's telling you to adopt AI, but nobody is telling you what tools to use. How do you adopt AI? Should you be focused on using it as a superpower? Google? Should you be building your own tools? How do you get used to it? All this sort of stuff. I personally find it's a lot of experimentation. It's a lot of fun, but it's really confusing and it's really scary. So anyway, I told AlphaSense about my problems and they organized a webinar to try to help out. I'll be sitting down with Dave Wang of Wall Street Prompts and Ben Collins of AlphaSense to break down the modern AI stack for investors. What horizontal platforms like OpenAI and Claude and agentic workflows and finance specific intelligence tools where each one can actually fit and help in a real research process. So, if you're trying to get better at AI, improve, develop AI-enabled workflows, you're not going to want to miss this webinar. Join us on We're going to record it next week, middle of like June 18th, and it'll be going live June 25th. So, there'll be a link to register in the show notes and, you know, please feel free to lob in any questions you have on using AI, whether they're general tools or AI-specific tools like AlphaSense. So, thanks AlphaSense and I'll see you for the webinar soon. All right, hello and welcome to the yet another value podcast. I'm your host Andrew Walker.

With me today, I'm happy to have Alex Roepers from Atlantic Investment Management. Alex, how's it going?

It's going well. Thanks for having me.

I'm excited to chat today. We've got some names in common that I'm really excited to talk about. Before we get there, disclaimer to remind everyone that nothing on this podcast is investing advice. There is a disclaimer in the show notes. There's a disclaimer at the end of the podcast. So, you can get all those disclaimers at the end. Alex, excited to have you on. The two stocks I really wanted to talk about were Nomad and DOWK, which, you know, looks like two 13F. We've got some overlap there. I think they're both really interesting situations. So, we can start by talking war stories, or we can dive into whichever of the 2 you think is more interesting. You let me know.

Well, let's start with Dauch, symbol DCH. It's trading at $6.32 on the New York Stock Exchange. This company came about through the merger of American Axle & Manufacturing and an English company called Dowlais Group, previously listed as DWL.L. That's basically the former GKN Automotive. It's about a $5 billion company that was spun out from an aerospace division that GKN had. In fact, the combined company was bought in 2000 uh, or 19, I believe, by Melrose Industries in the UK.

Atlantic, you know, has been a mid-cap value investor for over 30 years. We focus on the US, Europe, and Japan, and we're very concentrated on catalyst-driven situations. GKN, due to its low valuation and many catalysts to unlock the value, particularly by splitting aerospace and automotive, was our largest holding in Europe in 2018. We actively promoted to the company at the time to split the company into 2 pieces to garner a much higher multiple than the aerospace division would get.

We were glad to see that Melrose, which is a publicly traded private-equity-type company, took a hostile approach to unlock this value. We benefited from that, and that was done in 2019. We sold the stock with a big gain and left it at that, and kept Melrose, which then, through corporate developments, ended up being basically a replication of GKN after having sold everything else, paid down some debt, and lived through COVID, which was harsh, to say the least, on their businesses.

We revisited them, dusting off the same playbook, splitting these 2 companies in 2023 after they paid down some debt. Basically, Melrose Industries was GKN Automotive and Aerospace once again. They then decided, also with our urging, with letters to the board and so forth, to split the company in 2. That now worked. Melrose became the aerospace business.

We had it in the portfolio for a while, until it became too expensive for us. It basically rose to the valuation we had hoped for. Then there was this orphaned $5 billion business called Dowlais, which actually is quite attractive but was in the doghouse, as many other automotive-parts companies and component suppliers were.

Dowlais sat there with very little support and following. It had tepid results. Meanwhile, in the United States, American Axle had similar issues, being in a recessionary environment. It was suffering from the trend toward electric vehicles because most of its content was on ICE, internal-combustion-engine-type cars.

Anyway, they both had their issues, and I guess they both found each other. We were out of Dowlais when the merger was announced, but once it was announced, it perked our interest right away. You suddenly had a company that, combined, was double the size—more like $10 billion to $11 billion in sales—with tons of synergies between the 2 of them, critical platforms, and a much-improved outlook in terms of a stabilization of the trend toward electrification.

ICE was holding itself up much better. Hybrid cars were also doing well, and they had good content on all of them. We looked at this in February of this year and very quickly decided it should become a core position. We've done that in stages, obviously knowing that, in the initial stage of this new company, both its unfamiliarity and the name Dauch were not everybody's favorite.

What does it mean? It's the name of the CEO whose father started American Axle many years ago. How much do they own? They don't control the company. But anyway, they decided to put their name on it. Maybe it seems to be a trend these days, but we're not too happy with it.

Nobody knew it. They had to go through the initial presentation after closing in February and then the first earnings report in May. Particularly with the first presentation, they downplayed the near-term outlook and the stock got hit, which was an even better opportunity to add to the situation.

That is a little bit of the near-term history of DCH, of Dauch. It's sitting, as far as we're concerned, on the tarmac. You can take an analogy to aerospace. It's taxiing around. In our view, this company can earn $1.50 to $2. I'm being very rough with the numbers—on a $6 stock, even at a very low multiple.

If they do a good job with the synergies, if things go a little bit their way economically, which I think they will, and they don't have to go heroically, you're looking at a double or triple on the stock in the next, let's say, 1.5 to 2 years.

That was a great overview. I think value investors, particularly event-focused ones, are very familiar with Dowlais just because of the whole special situation, the spin. It was in London. It was always very cheap. I know a lot of people who liked it at 200, liked it at 150, liked it at 100. It was at 50, and then the merger got announced and it went up to 80 or something. I can't remember the exact numbers, but they were excited.

Let's have a look at Dauch right now. One of the things that jumps out to me when I looked at it for the first time is one of the things you mentioned. It is crazy that they named the company Dauch after the CEO's family. He owns less than 1% of the stock. I understand his dad is the founder of American Axle, but it was just crazy.

When I saw this and was investigating it, I expected him to own 30% of the stock, with the family having been involved, you know, since the Ford family or something, and it's just not the case. My worry here is—you have a company that, you know, American Axle buys Delphi. You have a company that does that, names the whole combined company after the CEO, and no one on the board owns any stock.

I think the CEO is hilariously overpaid, and you kind of combine that and say, "Hey, my biggest worry here is—we'll talk leverage, we'll talk business, all that—but my biggest worry actually is I'm worried these guys are going to be empire builders."

It’s really easy to be an empire builder and buy a lot of suppliers, feel really comfortable, and overpay yourself. How many auto suppliers really work out well for shareholders? I don’t think it’s that many. So, that’s my biggest worry here. I’ll pause there and toss that over to you.

Yeah. No, I hear you, and I’ve had the same reservation about the naming of the company. I must say, we’re involved in a company called Aptiv, which is the former Delphi Automotive. They called it Aptiv, and it became a growth stock, a favorite, a $20-plus company. Once the EV trend started to slow and become less exciting, the stock came down hard and became a value stock.

We got involved with Aptiv about a year and a half ago, when it became a real value stock, dropping down in valuation. Management got so mad at what happened to the value that they bought back a quarter of their shares with all the cash flow they had. Eventually, also at our urging, they split the company in 2.

This is also a trend in Europe. We’re involved with Continental, the German tire company, and they’ve been spinning out pieces. It’s very hard to find a good name these days that’s not taken by somebody else. In their defense, Continental came up with a name for a $20 billion company that’s very sexy at the time: Aumovio. I’m not making this up.

Aptiv came up with a company I still have trouble saying: Versigent. All these companies are great, by the way—very cheap, much more focused, paying down debt, buying back shares, and cheap. We also own them. We own all of them: First Majestic, PGTI, Versigent, and Aumovio in Germany. The symbol there is AMV0 GY. You have a $20 company here, an $8 company there. All very cheap.

When Dowlais and American Axle came together, I guess there must have been a few brainstorming sessions. They finally gave up and said, “What the heck? We’ll put the company name on it.” I’m with you. I don’t like it, but I’m also not going to steer myself away from a great value stock because of that irritation.

I know you also brought up the empire building and the number of shares that they earn—or particularly Mr. Dauch earns—when the stock does what it’s supposed to do, which is go up higher. It could be deemed a bit aggressive, but coming from 1%, he’s not going to own a lot more. If he achieves that, we’re going to be pretty happy. I think he’s aligning the interests pretty well.

We should also see this in a world in which the most talked-about thing right now is SpaceX and Elon Musk, with all the talk about corporate governance violations and self-dealing. That’s wild. So, anyone wanting to go there, that’s massively overvalued. I suggest all your listeners steer extremely clear of that situation, even though they’ve engineered a climactic launch here on Friday because so little is in the float, so many people want to buy it, and so many indexes have to buy it. Beware. Long term, that thing is not only very overvalued, but it’s a grotesque governance situation, with Mr. Musk getting tons of shares before and after the deal.

Anyway, put that in context with Dauch, which is actually pretty minor in that perspective.

So, no, look, you hit on a lot of the pieces there. SpaceX, Elon’s got his issues, and SpaceX has all of them, but there at least you can point to Tesla and say, “Hey, look at Tesla’s stock. This is the guy who, whether it’s all smoke and mirrors or whatever, has rewarded his shareholders.”

With Dauch, you’re just kind of like, “Who are you to be paying yourself like this?” The 2 things I want to hit on in what you just said: You mentioned Dauch. As long-term listeners will know, I love the dark arts components, where a CEO is getting really bullish, taking grants and PSUs and stuff that vests if the stock goes a lot higher.

Investors can go look at this. This is a February 3, 2026, 8-K. The CEO here gets a huge PSU package. As you and I are speaking, the stock is just above $6. The stock has to go to $12 per share by the end of 2029 to start vesting on the low end, and on the high end, the stock has to hit up to $22 per share.

This is a company trading at $6. They give the CEO, who named the company after himself, a PSU target that only starts vesting at $12 in less than a 3-year double—or I guess that’s 3 and a half years. I think you can see where they might see the puck going. That’s not to say there aren’t issues there, but that was the thing that got me excited about it. I’ll pause there on the dark arts. I do have a few more questions on Dauch for you.

Yeah, no, I’m with you, basically, on your view of it. We think there’s good alignment of interests in general. I think the opportunity set is really good. I think he’s pretty well suited to extract the synergies and drive it higher in order to hopefully make generational wealth for himself and his family. Along the way, all our shareholders—minority shareholders—if we’re astute, are early, and believe in the story, we’ll make outsized returns.

I completely agree. So, you mentioned the synergies there, and I think the synergies are the other really interesting thing. If you’re just looking at it, it’s a company that does about $1.5 billion in LTM EBITDA. Obviously, this is an auto-parts company, so there’s significant CapEx and you have to adjust for that. But let’s just use the $1.5 billion EBITDA number: $5 billion-plus of net debt.

Dauch is a $1.5 billion market cap company with $5 billion of net debt and $1.5 billion of EBITDA. It’s pretty leveraged, but they’re saying, “Hey, the American Axle-Dowlais transaction is going to deliver $300 million-plus in EBITDA, so that’s going to drive the growth going forward.” How do you think about the synergies? How do you get comfortable underwriting that synergy number? If it’s $270 million instead of $300 million, we’ll be okay, but if it’s $30 million instead of $300 million, it’s probably going to be bad. How did you get comfortable with the synergies and think about those?

Well, so far, from what we’ve seen in their presentations, they obviously split it into buckets that we can all either get our hands around or our heads around. SG&A, which is about 30% of the $300 million, is about $90 million, for that matter. There are public-company costs they can cut out, workforce optimization, streamlining engineering and research and development, and eliminating duplicate offices.

So, $90 million on an $11 billion sales base is obviously the beginning of the SG&A piece. Then there’s the purchasing. These companies obviously buy very similar types of raw materials and inputs. Economies of scale bring the purchase costs down with the vendors, along with vertical integration and global freight costs, et cetera. That’s the 50% piece that will come over the 3 years in a more gradual fashion.

Then operationally, I think they have 170 plants or something, and they can optimize locations. They can cut inventories and reduce the manufacturing footprint, et cetera. So, I think it’s reasonable. This is 3% of $11 billion, I think you mentioned that. In very synergistic manufacturing companies, we think this is very achievable, certainly when you give it a 3-year target.

I think they’re hoping to be at a $100 million run rate by the end of 2026, which is an 11-month year because they closed in February. I think they’re already at $35 million or so after the first couple of months. I think the $100 million is probably something we’ll see confirmed. From there, the other $200 million, I think there’s a high probability.

On the synergies, one thing that’s not lost on me is that they say the majority of the synergies, if I’m remembering correctly—as you said, the deal closes February 3, 2026—are going to be realized within 2 years. That would say, “Hey, by the end of 2028, you’re getting close to fully run-rating the synergies.”

Again, in the dark arts, all those things that they kicked in don’t expire until the end of 2029. It’s just another thing that’s saying to me, “Hey, it doesn’t guarantee it’s going to happen, but I think they believe what they’re putting out and how they’re thinking about it.”

Let me ask you about capital allocation. Capital allocation is interesting here because you have a business that, after the synergies, is going to do quite a bit of cash flow, but it is quite levered for an auto supplier. I think the CFO has come out and said, “Hey, we’re around 3 times leverage right now. Once we get under 2, we’re going to start talking about capital returns.”

I’m not as familiar with how the CEO at this company, when they were in their American Axle form, thought about capital returns. How do you think about capital returns and the go-forward path here? The other thing is, they are dowish. Maybe they want to go roll up a bunch more auto suppliers.

Yeah, no, I think the first order of business is to get through 2026, achieving that $100 million run-rate target and breaking even on cash flow, because there are expenses related to achieving the synergies and integrating the company, as well as deal transaction costs, all of which are hitting this year.

So, we have in our model zero free cash flow this year, or very little. It’s going to be 2027 and 2028—2 full years—to get all these synergies and then crank this thing out for cash.

I mean, we do assume about $500 million for CapEx for the combined company. It's about 5%, a little bit nearer 4.5% to 5% of the company's sales, which is pretty typical for both. The total D&A is running at a much higher number because of historic depreciation at both companies, as well as some purchase price accounting. We've got it currently in the $850 million range.

So, there's about a $300 million spread between depreciation, amortization, and CapEx. That would depress earnings per share. We don't care. The earnings-per-share number will at some point be relevant, and I think the companies—and we'll push them for that—will at least do an adjusted earnings per share to account for amortization and things like that.

But we're not at that stage yet. We're going to get more active as a shareholder once they've announced the next quarter and we have a chance to meet with Mr. Dauch in person, whether it's in Detroit or here. We'll give him our unsolicited advice, which we are quite good at, and do so in a respectful manner. We always want to stay respectful because I think more things get done that way.

But we will hopefully be articulate and forceful in trying to help him get to where he wants to go, which is pretty much the same path we want to be on. We'll help him with messaging, and we'll help him with capital allocation priorities.

I would say, as we look at it now, the messaging is very important. They should have a capital markets day by early next year, 1 year after the deal, to really lay out the progress, lay out a credible road map for much higher earnings per share, debt repayment, and a capital allocation policy in years 2, 3, and 4. So, we'll push on that.

Of course, they need to show the Street that the cash flow is rather high. Any kind of adjusted number, well explained, I think is very helpful here for the sell-side and the buy-side. So, that is our near-term plan.

But I would think that getting to below 2.5 times net debt to EBITDA, as they stated, is very important. At that point, depending on where the share price is, I would imagine it would still be very accretive to buy back shares. It's about having a more balanced approach.

I would like to see them even lower in that debt-to-EBITDA ratio at this point, but I can revise that depending on how things are because, at the end of the day, they are operating in cyclical businesses. I think somewhat lower debt levels are probably healthy, but if the shares are unappreciated, we will probably push for a pretty good allocation to share buybacks. I think they'll do that.

I agree with most everything you say. The only thing is, the stock is flat to down over the past 5 years. I understand there's a lot of cyclicality in this business, and the auto cycle has not been great over the past 5 years, but he's making $12 million per year before this thing. He gets the one-time PSU grant—$12 million—on top of more than $12 million per year.

Shareholders aren't seeing anything. I'm not seeing anything that suggests this is a $12 million-per-year CEO, if that makes sense. And then, to name the whole company after yourself, to me, it doesn't mean I think the stock's not going to work. But I look at him and think this is just typical of some of the worst of what you get once you have high-level managers who don't have a big stake in a company. Those are some of the signs I see.

We have addressed compensation and corporate governance issues many times in our 30-plus years of doing this. I will not predict anything as to which way we're going to go with this one, but you flagged issues that are front and center.

If the company performs extraordinarily well and things are going in the right direction, these are less of an issue. The moment there's underperformance, these become huge issues. Put it that way: Our agitation and our activism go way up when a stock is not doing what it's supposed to do, mostly as a result of management not doing what they're supposed to do. So, that is to be seen.

It's something I've noticed in myself, and I've wondered whether it's right or wrong. When the stock is kind of working, I'll see issues with the company and think, “Whatever, let them go.” Then, when the stock isn't working, I'm thinking, “We've got to cut these guys' heads off. Put them on the chopping block right now.”

I never know. Technically, you should be doing both, right? If a company is benefiting from great tailwinds and the stock's going up because they just have some AI, you still really should be holding their feet to the fire. But I don't know. Humans don't quite work that way.

Doing activism of whatever kind for activism's sake—if a stock goes up and performs well, we eventually leave the company. We're not going to try to pick a fight. Somebody else can pick it if they think there's more juice left on the table and they can do it from there.

We're very simple people. We like to buy low, sell high, and move on to the next thing. Here is a company whose stock is low, and we're ready to be involved for a while. But I think there's so much low-hanging fruit and so many obvious ways to get the stock to go higher. We don't want to see the CEO stand in the way of that. We want the CEO to be a big facilitator of it.

If he gets what he wants, to a large extent, that's fine. But if it's egregious and the results are not good, somebody has to say something about it. Most likely, if we believe in the story, it will be us as well.

How much do you think about the auto cycle here? For those who don't know, for the past few years—since the COVID highs—the new-car cycle is really what they're there for, right? They put parts into new cars. One of the things you hate about that is that you're really dependent on the cycle. You are almost a captive supplier.

But one of the things you like about that is that you can install in a new car. Most of these new-car cycles are 5 to 7 years on the platform, so you're kind of locked into that and have some visibility. But swings from 15 million annualized to 14 million or 16 million make a big difference when you're dealing with this much operating leverage. How do you think about where we are in the car cycle as it relates to this investment?

We're not projecting much growth. I think we're at a pretty steady level. It's obviously been much lower than what people predicted 5 years ago. We were thinking 120 million cars a year, and now it's around 90 million or something in that range, total for passenger cars. A lot of it is in China.

Look at what China and some of the Koreans are exporting here. Those are issues, but American Axle & Manufacturing and Dowlais, so the combined company, has a lot of exposure to both the Chinese OEMs and what's going on manufacturing-wise in Asia. That's good. They're a real global player with critical-component supply, so I think they're going to participate at a pretty good level across the world.

We're not assuming any real increase in total car production. There are obviously big shifts within that as to where it's coming from, with a big benefit to the Chinese in particular and the Asian manufacturers, who are just low-cost. If they're let into Canada, Malaysia, and Europe, you can see what they do in terms of market share. You better have content in those cars as a supplier.

But, again, we're not assuming much of an upturn there. It may happen. At the end of the day, the global economy is growing and the world population is growing. There's a lot of narrative within the industry about robotaxis and autonomous driving, and about what the new generation wants to do and whether they want to own a car. I think at the end of the day, as the world economy and the world population grow, there will be higher car sales overall. That will be a benefit for all suppliers.

Yeah, you mentioned robotaxis. Obviously, you look at what Waymo's doing, and you look at how they're getting better. I would be surprised if, at some point in the next 50 years, we weren't talking about a robotaxi.

The thing I thought about with Dowlais, and I'd love to hear your thoughts on this, is that we're not dealing with these SaaS companies that were trading at 100 times free cash flow, where AI disruption comes along and you say, “Oh my God, there are no tangible assets here. The terminal value might be zero. We need to sell this off 90%.”

Dowlais is trading at—I have it at—5 times its adjusted free cash flow number, and that should be going up as these synergies come in and as we normalize everything. Its adjusted free cash flow number adds back some of the acquisition costs and synergies you talked about. But with the synergies still to come and everything, I have debated this.

I'm really concerned that if America lowered all the tariffs right now, 100% of new-car sales would be Chinese EVs that we'd be importing from China. But we're talking about 5 times free cash flow. So much of the value is coming back in the very near term. How do you think about that dynamic here?

We're playing it for the next 2 or 3 years. It may well be that, if you take a 10-year view, things are a lot different. But I think in the next 2 or 3 years, this company is focused on integrating, getting the synergies, and blocking and tackling.

As far as shifts within the U.S.—either removing all the tariffs or letting the Chinese in—I think that is a longer-term proposition, if at all.

And meanwhile, they’re selling all over the world, including in China, so the impact will be muted. The tariff situation between Canada and Mexico is largely exempt because of the USMCA agreements. I think we’re okay with this company for the coming years in terms of the end-market environment.

I think it’s going to be blocking and tackling and integrating the company as the main focus. The end markets are large, and they are very critical as a supplier. So, I don’t think you have to worry too much about the top line, in my view.

Yeah, and look, again, the nice thing about buying something this cheap is they might generate their entire market cap in free cash flow over the next 4 to 5 years, right? So, it’s not like you need much terminal value there.

Unless you have anything else on Dauch, I want to turn to Nomad, because that’s actually one I’m more excited for. People might have heard I was excited for Dauch, but Nomad is actually one I’m more excited for, and I’m happy to talk about why. But I’ll just turn it over to you: What is Nomad, and why do you find them so interesting?

Okay, so Nomad is listed in the US under the symbol N-O-M-D. Just to give your listeners a little idea, it’s currently a $10.21 stock. Looking at the chart over the last 5 years, it was at $30 in 2021. It fluctuated around $15 to $20 a share between 2022 and 2025.

It recently got cut in half because of some weakness and some under-management. It’s nothing major, but it’s now at a very low valuation of, say, $10. What this company does is all European. Even though it’s listed in the US, it’s all European frozen foods.

Frozen food has its own peculiar end-market situations. It is considered favorable in the sense that it is easier and quicker to prepare than nonfrozen food. It is $2 to $3 less per meal, so it’s an economic way of feeding the family.

Think of fish sticks, like Iglo—that’s one brand they have. They have other brands that people might know. They have a lot of first-class brands, like Birds Eye, Iglo, and Findus, and these are mostly familiar brands in Europe. So, maybe not all your listeners will know them, but suffice it to say that the majority of their brands are market-leading or very well known.

The frozen-food category is, again, conditionally growing, but it has had ups and downs. COVID, in particular, led to a huge increase because people didn’t want to go out and shop, so they put stuff in the freezer and wanted to save money. Then there was overstocking and a huge decline. That also played a part in the share price and the earnings.

The earnings are not really that much affected. They’re down a little bit, mostly because of cost inflation, some destocking, some under-management, and some competitive threats here and there, but nothing major. They continue to be very profitable.

Finally, the other advantage of frozen foods, at least as it’s seen in Europe, is that it helps with sustainability. Forty-three percent of shoppers think that buying frozen foods reduces waste, which is probably true in some cases. At least those are the reasons people like it.

So, here you have a branded frozen-foods company. Two gentlemen are behind putting the thing together, and they’re still large shareholders. One is Martin Franklin. He has done repeated business combinations and created value along the way. Then Noam Gottesman is also very involved in the company.

For a while, they had an arrangement where they actually got, almost from a hedge-fund perspective, a performance fee structure even on their shares within the company. Gottesman came from GLG, and I believe GLG—no, sorry, GLG is a hedge fund. That arrangement is now gone, which is a good thing.

But they remained shareholders, and in fact, very recently, Mr. Gottesman decided to buy a large number of shares at around $10 a share. So, it’s a good sign that somebody who’s very involved with the company, very bullish on the company long term, and very involved in bringing in the new management makes a statement from his position by buying more of the stock.

We were already in it. We’ve been averaging down, and we’re now getting close to our cost basis in the stock. That’s why I don’t like to talk on a podcast or at conferences about a stock that’s already worked. I like to talk about another stock like this that’s on the tarmac, taxiing around, and people can still jump on board if they like what they see.

So, here’s Nomad. They have started the year pretty well, from our perspective, kind of hitting the expected levels of earnings. Let me give you a couple of numbers for everybody who’s listening.

This is a company that does about $3 billion to $3.5 billion in sales, in euros. They have earnings per share this year forecast at about $1.50 or so. The stock is at $10, mind you.

Net debt to EBITDA is not bad. They’re bringing it down, just like Dow Chemical, but it’s not an issue. It trades well, and interest expenses are very well covered. You’re basically looking at an EV-to-EBITDA multiple of less than 7 on current earnings.

You’re getting paid while you’re waiting for good things to happen, with over a 7% dividend yield. I mean, okay: a 7% dividend yield, 5.5 times earnings, 7 times EBITDA, and an operating-income multiple of about 8.5 to 9. So, that is a value stock, at least in a noncyclical area with some growth to it.

It is a takeover candidate. You have insiders buying, and you have these metrics. So, we like it from every angle.

No, look, I really agree. I think there’s a lot to like here. I mean, you mentioned Martin Franklin. I think one of the things that happens here is that so many value investors have followed Nomad over the years.

I think there were a lot who were long at $20, long at $25, thinking, “Hey, you’ve got this noncyclical frozen-food business.” I think frozen foods is a great area to play in because anyone can spin up a Pop-Tart competitor or a dry-goods competitor. But frozen foods take a lot of logistics and a lot of operating leverage.

That’s not to say you can’t do it, but I just think it is a much more advantaged area than a lot of the rest of the grocery store. As you mentioned, they’ve got brands.

When I’ve done expert calls, the first thing a lot of experts will say is, “Oh, Birds Eye. Is Birds Eye the one with the fish fingers?” I think it’s Birds Eye. The first thing they’ll say is, “My history with them dates back to when I was 6. I was getting microwave meals from my mom.” There’s just a long history with these things.

So, I think there’s a lot to like here. But my question would be this: The stock has gotten hit because the old CEO, who put this all together, left at the end of last year. I think it was an amicable departure, and he was gradually replaced.

There are a lot of operational issues here. When you read their 2025 Analyst Day materials, they’ll say, “9 years in a row, you’ve been outgrowing”—and they’re kind of just telling you to ignore the last year, because in the last year everything was kind of falling off a cliff.

A lot of bears would point out that private label is making big inroads. Aldi in the UK and Europe is making big inroads, and they’re selling their frozen private-label products for much cheaper. It’s taking share, and you’re seeing Nomad lose volume.

You’re also seeing the new CEO say, “Hey, we need to reinvest a lot. We need to start innovating.” I’ve thrown a lot of the bear pieces to you. What do you think about that?

Yeah, no, I’m aware of these pressures and the issues that they’re dealing with. I think the comfort level that we have is that, between the new CEO coming on board, the insider buying, and the fact that they are spending more money on marketing and R&D to drive differentiation, they’re fully aware of where they are lacking and losing market share, and they’re addressing these issues.

It is a show-me story, for sure. But I think you’re getting paid to wait and paid to see it work out. The odds are very much stacked in favor of the persistent and patient shareholders here because, as you said, the basic category is good.

Yes, it’s so good that other people like to poke holes in it, go after them, and go after their market share. But I think at the end of the day, they’re going to be able to fight off inroads in the areas that really matter, hold market share, and get growth basically to stabilize and turn the other way.

At the same time, of course, you’re spending more on marketing, you’ve got a new CEO, and there’s more in R&D. That goes counter to trying to get margins to go higher in the near term, so there’s some pressure that way as well.

We’ve seen that in 2026. Profits are lower; there’s a greater percentage decline in profits than the sales decline that you’re having. But I think that will turn.

At the same time, they need to bring in cash, and there’s good cash flow. Honestly, with a 7% dividend yield, you would say that’s way too much. Why don’t you just pay your debt down a little quicker?

Again, the debt is well under control. They need to bring it well below 3 times, and they’ll get there in 2027, even with the dividend that they have. Meanwhile, if I were a private-equity firm, I’m looking at this.

You see how much money they give away in dividends, and you know what can be done here to take out corporate costs, etc. You can refinance the whole thing. It would make a lot of sense from my perspective as a private equity deal because there's a lot of cash flow here that can be used differently, partially to pay down more debt that's required to buy the company. Although you can write a nice equity check for the equity value that's out there.

I think there are many ways to win here. We're at the very early stages of trying to find out if the new CEO can bring better margins to the bottom line and renewed growth, or at least stabilize sales levels. So, I cannot give you or the listeners any high optimism that they can do this, but I think there are a lot of telltales that suggest we have the odds stacked in our favor, even under pretty conservative and tepid assumptions going forward.

You mentioned that Nomad could be a takeover candidate, and you mentioned private equity in your last answer. I really like the story. I'm a little skeptical of the takeover just because I've looked at Martin Franklin a lot in history. I believe the only time he's ever sold a business is Jarden, and I think he actually regretted it because, if I remember correctly, he sells Jarden to Newell. Am I remembering that correctly?

Then he goes activist on them like 13 months later, saying they're ruining the business. I don't think he's ever sold anything else. I think Platform Specialty Products may have sold one of its divisions. But do you think he would actually let go of the rope and sell this company?

Well, at the end of the day, he has 7%, according to what I see—10 million shares, 11 million shares. Gottesman has more now because he bought some recently. I don't know. I've not spoken to him. I don't really know him, but I know of him, just like you mentioned the Jarden deal with Newell and some others. I think it's really not that relevant. They don't control the company.

They are obviously key shareholders, but I would imagine they don't like the price here at $10 much either. I think they would be very open to either an activist coming in. Now, maybe not open to an activist coming in, but certainly outside interest. Let's put it that way: outside interest that would help bring attention to this company.

Of course, they need to bring attention to it by virtue of executing well, righting the ship, getting the cash flow to drop to the bottom line, and bringing the debt down. That is their task. Then there's the messaging task, which falls to the new CEO and to them. I think they're doing better on that recently, and I think there's more to come. We're going to roll up our sleeves because we just recently made this a big position, and we'll be more involved with them. Let's put it that way.

Again, our constructive engagement includes messaging, including helping them present the company in the best way and drive the priorities in terms of operational performance and capital allocation as much as we think is the right approach.

No, it's—you know, and you mentioned the dividend a few times. One thing you just wonder is, hey, you've got a company trading for, I don't know, 6 times P/E, with a decent bit of debt on it, too. Is the company really best served by paying the dividend at this point? Or would it be better served by cutting that dividend and saying, “Hey, we're going to buy back more of our stock at these levels. Or we're going to pay down the debt at these levels. Or possibly some combination of the two”?

You just look at that dividend and wonder if it even makes sense at these levels. Do you think that's an area for improvement?

I think they don't need to cut the dividend at all. I think the 17 cents per quarter they're paying, which adds up to whatever that is, is about 6.5% to 7% on the current share price. I think if they do their job right and keep the dividend just where it is, they have excess cash besides that to pay down the debt to the desired net-debt-to-EBITDA level of 3 and then lower after that.

I think the stock will go to $15 to $20, and you'll see the yield dropping that way to 4% or 4.5%. I don't think the amount of money they spend on the dividend, which is about $90 million a year, doesn't prevent substantial positive cash flow despite that. It's not like they're borrowing money to pay the dividend. That would be a key test, of course.

No, I certainly hear you. Maybe it's because I'm too enthralled by share buybacks, but it does strike me as paying this big of a dividend when you've got the stock this cheap. In my dream of dreams, you slash the dividend, buy back a ton of shares, and 2 years later we all celebrate that you retired an extra 12% of the shares at $10. But maybe that's a little too difficult.

One thing I have consistently heard when I've been looking at this from friends who are involved—or not involved—is they say, “Look, Martin Franklin has a really good track record. But he's in charge of a few businesses, and at this point his shareholding in APi Group is worth more than $1 billion, and his stock in Nomad is probably worth $100 million.” I think they would say, “Hey, APi is where all his focus is, right?”

They would follow that up by saying, “Look, Nomad brings the new CEO in, and when you hear the new CEO talk, he says, ‘Hey, some of our plants in Europe are 20%, 30%, 40% utilized. We dropped the ball on pricing. We weren't innovating on value and stuff.’” I think they'd say, “Hey, maybe he's not as involved here. He's focused on APi, and you kind of let this thing start falling apart. Does he care? Does this matter? Is he just serving as a caretaker?”

There's a difference between a packaged company that's getting run really creatively and well versus a packaged company with a shareholder, an overall controller, who's just letting the management team do what they want.

I can't speak for Mr. Franklin or Mr. Gottesman. I think both have had successful careers, some overlapping and some separately, and I think both are substantially wealthy and have a lot of other interests. However, this is currently a $100 million piece of their total pie, and I'm sure they'd like it to be $250 million—$25 a share, where it was—or higher.

I think spending some time during the day a couple times a month to make sure that this thing is going in the right direction is probably the reason why they became so successful in the first place. So I don't take that as a risk, if you will. I think this is important to them both in terms of recouping value that they feel was lost, for all proper reasons perhaps, but also for ego as well.

Their names are attached to this company. Not knowing directly from the gentlemen, I would imagine this matters a lot to them, and they'll do what's necessary to steer it in the right direction. I think it's actually a net positive that they're there. It would have concerned me if they were selling here. In fact, the opposite happened, at least with Mr. Gottesman: he's buying it here.

Yeah, the other interesting thing, I think, is the new CEO. This is just classic new CEO inherits a company, right? He comes in—I think he took over in October, if I remember correctly, or maybe he was named in October and took over January 1. But the stock really gets hit on his first earnings report, where he basically resets everything.

To me, that's classic CEO: “I take over, I clean the deck, get everything out there.” I'm talking about, “Our plants are underutilized. We need to reinvest in marketing.” I've got—I'm just looking at my notes—4 different times he's been at conferences or earnings calls where he said, “We're going to have a great investor day in October.” I don't know if it's October at this point, but he says in the fall we're going to have this great analyst day. “We're going to show you guys everything. We can't wait to show you our plan.”

To me, you've got the value here. You've got a business in a category that I personally very much like. You've got, hopefully, really good controlling shareholders, and you've got a CEO who's coming out here and saying, “I'm going to blow everyone away with this plan.” This is classic CEO taking over, kitchen-sinking everything, and then getting ready to make the story really sexy. I just think it sets up really well, and you're getting it cheap.

This is not a flash-in-the-pan business. I do have concerns about the cyclicality, but I'm pretty sure British kids are going to be eating frozen fish fingers 30 years from now, and everything. I just love that combination of sustainability, cheapness, and the incentives aligning there. I'll pause there. I rambled around.

I agree, agree, agree, including Dutch, Croatian, and German kids as well. I think you're right. This is a very sustainable business in terms of consumer demand and interest. Yes, there are competitive pressures. Yes, there are operational issues here and there, but I think this new CEO—we need to get under the hood a little bit more now that we've made it a big position.

We're waiting to get past earnings, then to get in front of the CEO and perhaps even get through to one of the gentlemen we just mentioned earlier to get a better read on it and to see if we can all be aligned on how to steer the thing toward greater appreciation and, more importantly, greater results and then appreciation in the market.

So it’s a good risk-reward here.

Last question I’ll ask on Nomad, and then we’ll wrap this up or talk about anything else you want. My one other concern here is—I’m just looking through my notes, and I said, “This is add-back city.” They do have pretty aggressive add-backs of some of these financing costs and D&A, but continually you’ll see business transformation costs and organizational streamlining programs. They do a lot of add-backs.

I think it comes out to about 20% of their earnings number that they present per year. Do you feel comfortable with the add-backs here? This is a business that was formed through M&A, but it is one of the risks. I’ve heard people say, “You’re giving me a 6× earnings number, but once you take out those add-backs, it’s not actually real earnings. It’s much higher.”

I totally agree with you. This is one of the main things we push on, because in order to get to appreciation—that is, a higher multiple—you need to show progress on all fronts. One of those fronts is having as clean a number as possible and as few add-backs as possible.

We will go through this in quite a bit of detail and say, “Okay, this number has to come down.” Or, if it is 1%, it’s a more limited amount of restructuring; you can report it separately and people can do with it what they want. But it should definitely be lower than 20% of reported earnings.

So, if that’s been the trend—and we’ve seen it as well—that’s not good. It needs to change. The guy has been in there less than a year, and there needs to be an improving trend very quickly. The same is true of net debt to EBITDA, the market-share situation, and sales. All these things need to improve. This is one more metric that I totally agree with you on that needs to get better.

Cool. Anything else on Nomad you want to talk about, or that you think we should be looking at or thinking about?

No. I think we covered it in pretty good detail. I think it’s a very solid risk-reward. Just like Dauch, it has issues that need to be addressed, and we flagged a lot of them, I believe.

The listener can make up their own mind and do their own work from here, but I think both line up as a very good risk-reward, with a strong margin of safety in solid, profitable businesses with good or manageable balance sheets, no real debt issues, improving balance sheets, and improving outlooks. I think that sets up both of them, from this very low valuation, for potential doubles over the next 18–24 months.

One last question, and then I’ll let you go. Dauch was formed through the merger of American Axle and Dowlais, and Dowlais was London-listed. There was a share component to what they took over from Dowlais, and about half the business, let’s just use rough numbers, is European auto.

Nomad is a 100% European business. It obviously trades in the U.S., but it’s a 100% European business. I feel like there is—let’s just use the word “taint”—some taint to anything that touches Europe versus America. You can see this with European-listed multinationals trading at big discounts to American-listed multinationals. Some of that is growth, but some of that, I think, is just doldrums.

Do you think there’s a through line with the two of these, that the European exposure is just an X factor? Or am I making that up, and these guys have simply stubbed their toe, and we’re just trying to cure the stubbed toe before they can work?

No, it is true that American companies of similar ilk or background typically trade at somewhat higher multiples. I wouldn’t make too much of it. In the case of Dauch, Dowlais was already quite international: a lot of Europe, but already a lot in China and a lot in the U.S.

American Axle is very much American, with China as well and some Europe. I think the pie chart of Newco is not half European, for sure. It’s less than that. So, you can look at Dauch as an American company with a very strong international presence. I’m not sure that the European component is going to be a net negative for them.

In the case of Nomad, yes, it’s all European. It’s in a noncyclical part of the European economy—frozen foods and consumer goods. I think it represents an opportunity, and if people are not comfortable with that, they shouldn’t do it. But Europe is a massive economic bloc all together.

You could imagine that Nomad, in my view—I do think that Nomad in particular would benefit from any resolution of the Ukraine-Russia situation, with further expansion and the ability to gain market share in some of these Eastern markets. Again, I think there’s upside to European stocks in general from a resolution of the 2 major geopolitical conflicts.

As far as the economic or geopolitical question of who’s running these countries, how socialist they are, and how much regulation they have, that’s always been an issue that flops back and forth. We have the same issue in the U.S., where we flop from Democrat to Republican. Let’s not get into that too much, but I would say—

“Flop” is a nice way—“flopping back and forth” is a nice way to put it.

The European market is full of interesting mid-cap value. So is the U.S., by the way, and that’s what we focus on as a business. We’ve done that for 30-plus years. We’ve got 10 great picks in Europe and 10 great picks in the U.S. Believe me, Japan has been fabulous, and it’s becoming something we can focus on another time. From my side, that probably covers it on these 2 names.

That’s perfect. Well, Alex from Atlantic Investment, this has been great. We’ll have to have you on again. I love Japan, too, so we can talk Japan and European mid-caps anytime. This has been great, and we will chat soon.

Andrew, it was a pleasure. Thank you.

A quick disclaimer. Nothing on this podcast should be considered investment advice. Guests or the host may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.