BNTGF - Tweedy Browne - Brenntag: Failure To Separate Business Segments Poses Value Recognition Risk

2024-05-11 10:50:00 ET

Summary

• We believe Brenntag's specialty chemical distribution segment is inherently a more valuable business than Brenntag's commodity chemical distribution segment.
• Due to a changing market landscape and in part due to activist pressure, this structure is changing.
• We believe the failure to separate these business segments could pose a risk for full value recognition in the market over time.

The following segment was excerpted from this fund letter.

Brenntag ( OTCPK:BNTGF , Germany)

A strong, if not predominant, factor driving new idea generation in our managed account portfolios over the last year continued to be material insider buying in companies that, at purchase, were trading at significant discounts to our estimates of their underlying intrinsic value. We have always felt strongly that purchases of shares by knowledgeable insiders at times when their company stock is trading at low prices in relation to metrics such as book value, earnings and/or cash flow can be a powerful clue to possible future outperformance of their companies' shares. Empirical evidence supports this view. As a reminder, the term "insider buying" refers to legal purchases of shares in their own company by corporate "C suite executives," corporate directors, and large shareholders. We also take an interest in studying companies that are buying back their shares, particularly when they appear to be undervalued....

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