Greggs Investment Thesis Statement

A New Position In Our Portfolio

The market has thrown us a gift, and it comes wrapped in a paper bag with a sausage roll inside. Greggs, Britain's beloved bakery chain, has seen its shares tumble around 25% following a softer Q4 trading update and a product recall. The market's reaction has created what we believe to be a highly asymmetric opportunity in a quality business that's currently trading at just 15.4x trailing earnings – well below its historical median of 19.8x.

Here's the quick take before we dive deeper: Greggs maintains returns on capital above 20%, sits on £125M in net cash, and has multiple growth vectors ahead. The current valuation prices in a draconian scenario while ignoring the company's proven resilience and expansion potential. We see limited downside from current levels, with the potential for significant multiple expansion as growth initiatives take hold.

Our thesis rests on three key pillars: