Stellantis is an underappreciated gem in an out-of-favor market. Recent layoffs at their Michigan plant unrelated to tariffs have only compounded the malaise brought on by recent whiplash trade policy changes. Investors have been understandably risk-averse in the auto manufacturing space, as supply chains tend to be both long and cross international borders many times before final assembly. Still, the name is a standout in the sector, boasting an industry leading balance sheet, relatively low current valuations, and a seductively low price-to-book ratio. For fundamental investors, Stellantis is the absolute best value in the sector. The company also boasts a current annualized dividend yield of over 8.2%, if investors are willing to remain holders for long enough. Stellantis only pays their dividend once per year as opposed to quarterly, meaning timing is uniquely important to secure such an attractive yield.
Investors seem forgetful that Stellantis is considered one of the “Big Three” US automakers, and includes a catalog of brands that are built and sold in North America. Investors could be forgiven for failing to recognize the brand name, given that Stellantis is the result of a relatively recent 2021 merger between the Italian-American conglomerate Fiat Chrysler Automobiles and the French PSA Group (Peugeot). The company is at the end of a planned drawdown in inventories as well as being between brands, which has resulted in a substantial retreat in both American and global market share. This has caused the company to appear to be in a larger contraction than future plans might otherwise suggest, and the company has made repeated contentions that they expect a return to growth in 2025 with the mass rollout of new product lines, particularly in the second half of the year. Time will tell if this pans out, but at current prices the risk of further downside is relatively muted relative to higher-flying competitors such as Tesla, GM, or even Ford. Moreover, Stellantis is a global company with global exposure, so it is important to keep in mind that the US is not their only market - the company’s margins, though historically low, remain healthy, and non-US markets keep the company’s revenue streams diversified in the event of protracted trade uncertainty or a broader economic slowdown. Automakers are cyclical, so it is important not to get too attached to them as investments, but Stellantis certainly stands out.
Please note that the Woodworth Contrarian Stock & Bond Fund, LP, of which the Millegan Brothers manage and are invested in, currently holds a position of STLA as of the publication date of this article.
Originally posted on The Millegan Memo on April 28th, 2025 by Quinn Millegan & Drew Millegan, managing partners of the Woodworth Contrarian Fund.
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