Reading a fund manager monthly, and going over their thesis on BAP (a stock they like).

I think we agree, it’s a takeover play, it’s attracting interest, it’s been badly managed and needs to take cost out, which (at least in theory) new management might be able to help with (new management being the key word there, they did have a new CEO starting, and amazingly, that person declined to join the day before they were meant to start!).

But for us, it seems to be carrying too much inventory. This article in the AFR, somehow didn’t warrant an update to the market by the company, seems to match this idea. If they want to get inventory down, they’ll have to lower prices to move it, and that’ll hurt margins. So it’s not clear there are past the downgrades, at least just yet.

Consensus earnings expectations have, at least, dropped enormously, the market was offsides with respect to growth previously. But at 15x I’d argue BAP is still “not obviously cheap”.

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