Plural Investing: Strattec Security ($STRT) Investment Case

In their Q2 2026 investor letter, Plural Investing LLC profiles Strattec Security ($STRT) as a new position in the Plural Partners Fund. Plural describes itself as a value-oriented, concentrated investor that typically allocates most of its capital to seven to eight best ideas, targeting businesses trading at a substantial discount to a conservatively calculated intrinsic value over a five-year horizon. The firm believes Strattec is being turned around by its first CEO who is genuinely independent of the founding Stratton family, and estimates the stock is trading at 2-3x its EV/FCF multiple in three years’ time.

Investment Highlight: Strattec Security ($STRT)

Business Overview

• Plural describes Strattec as an automotive supplier that designs and manufactures door handles, power access systems, keys, locks, latches, and related products
• The firm notes the company sells mostly to GM, Ford, and Stellantis, with 65% of sales generated in the US

Leadership Transition

• According to Plural, Strattec had effectively been run by the Stratton family from inception until July 2024, with Harold Stratton serving as CEO until 2012 and then Chairman until October 2024
• The firm’s conversations with former employees suggested the company could have been run more efficiently
• Plural notes that by 2023, value firm GAMCO had acquired a 25% stake and wrote to the board, which the firm says ultimately resulted in Stratton, the CEO, and most of the board exiting
• Jen Slater joined as CEO in July 2024; Plural notes she spent her entire career in the auto industry and turned around two businesses previously, and states its own background checks suggest she has the experience and track record required to improve Strattec’s economics

Margin Improvement and Cash Generation

• Plural reports that Slater has already increased EBIT margins from 1.5% to 5.0% and has guided to a 7-10% target
• The firm notes FCF has increased from single-digit millions to $30mm annually, while net cash has grown from $12mm to $107mm, partly attributed by Plural to released working capital
• If Slater hits her margin targets, Plural estimates the company will generate around $50mm in FCF in three years with net cash exceeding $200mm, including further working capital still to be released

Further Improvement Levers

• Plural’s due diligence suggests Slater’s plan is likely to continue working, with room for further improvement from higher prices, reduced supplier and tariff costs, manufacturing automation, a less siloed culture, and new contracts with non-US auto OEMs

Balance Sheet and Capital Allocation

• Plural views Strattec’s balance sheet as mitigating the historically significant risks the firm associates with auto industry investments
• The firm notes $107mm of cash growing by $30mm annually, with an additional $30-40mm expected from working capital reductions and the sale of a manufacturing facility
• Plural highlights that the company recently repurchased $7mm in stock within a few weeks and announced a further $40mm buyback, representing roughly 14% of shares outstanding, against a market cap of just $345mm

Valuation

• Plural believes that over the next three years Strattec will reach a 9% EBIT margin and generate $16.5/share in FCF after funding buybacks and M&A, while maintaining a net cash balance sheet
• The firm applies a 12x P/FCF multiple to arrive at an estimated value of $200/share, versus the current price of $82/share
• Plural first purchased shares this quarter around $70; the stock has since risen to $82

Plural Investing LLC views Strattec Security as a turnaround opportunity driven by new, independent leadership meaningfully improving margins and cash generation from a low base. The firm believes the current 11x EV/FCF multiple will compress toward 3x over three years as profitability improves, with a strengthening net-cash balance sheet providing downside protection in an industry Plural regards as historically risky for investors.

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