Strattec Security Corporation $STRT

The thesis

Strattec Security Corporation, of Milwaukee, Wisconsin, designs and delivers vehicle access products for the automotive and mobility industries: mechanical and electronic systems for secure vehicle entry, powered access, and latches (results release). It owns 51% of a joint venture in Mexico that makes painted door handles and exterior trim (10-Q). Our case is that a company with no borrowings and a growing cash balance is valued at about $249.7M, of which $111.8M is cash, while it keeps generating cash and buying back stock.

The evidence

Cash pile. Cash was $111.8M at 27 September 2026, against $108.2M at the end of fiscal 2026 in June and $90.5M a year earlier (release). At the end of December 2024 it was $42.6M (10-Q). There were no borrowings under the $40.0M credit facility or the joint venture's $10.0M revolver (10-Q). Total liabilities were $116.5M, mostly $55.1M of accounts payable, $15.0M of accrued payroll and $12.8M of post-employment benefits (10-Q).

Cash generation. First-quarter operating cash flow was $10.8M against $11.3M a year earlier, and capital spending $1.2M against $1.5M (release, 10-Q). Over the twelve months to 27 September, operating cash flow was $45.7M and capital spending $7.0M, which leaves about $38.8M, roughly 15.5% of the market value (10-Q, 10-K). Operating cash flow was $46.3M in fiscal 2026, down from $71.7M in fiscal 2025 (10-K).

Buying its own stock. The board approved a new $40.0M repurchase program on 28 May 2026 (10-Q). Between 27 July and 27 September the company bought 67,904 shares at an average $73.24, $5.0M in all, and $35.0M is left (10-Q). Diluted weighted shares were 4,053K in the quarter against 4,127K a year earlier (release). On 12 and 13 May the CEO, Jennifer Slater, bought 1,598 shares at $62.71 (an average) and $62.46, the CFO, Matthew Pauli, reported 2,000 shares bought at $62.53 and held by his spouse, and director F. Jack Liebau bought 1,000 at $61.37, about $286K in all (Forms 4).

Margin up from the fourth quarter. Gross margin was 16.5%, up from 15.6% in the fourth quarter of fiscal 2026 on lower sales, though down from 17.3% a year earlier (release). Foreign exchange cost $1.4M, or 90 basis points, and restructuring brought $0.9M of savings (release). Actions in Mexico during the quarter are expected to save $1.3M a year, and adjusted selling, administrative and engineering costs were 10.2% of sales, within the company's 10% to 11% target (release).

What the market is missing

The stock closed at $61.96 on 6 November, a market value of about $249.7M on the 4,029,566 shares in the 10-Q cover (Yahoo Finance and Nasdaq, 10-Q). Cash of $111.8M is about 45% of that, and the last twelve months' operating cash flow less capital spending, about $38.8M, is about 15.5% (10-Q). The company paid an average $73.24 for its own shares between 27 July and 27 September, about 18% above the latest close, and three insiders bought in May at $61.37 to $62.71 (10-Q, Forms 4).

The risks

Results fell from a year earlier: sales dropped 3% to $147.2M as lower customer production volumes cost $6.2M, partly offset by $1.0M of pricing, and net income attributable to Strattec fell to $4.8M, $1.19 a diluted share, from $8.5M, $2.07 (release). That included $2.4M of business development costs and a 26.2% tax rate against 21.6% (release). Adjusted EBITDA was $13.5M against $15.6M (release). The company says it has an active acquisition funnel and that more acquisition-related expenses may follow, so part of the cash may go to a deal (release). General Motors, Ford and Stellantis were 28%, 22% and 14% of first-quarter sales (10-Q). A large part of manufacturing cost is in Mexican pesos, and the 10-Q lists tariffs and trade policy, including the USMCA, as a risk (10-Q). The Gabelli group holds about 19.7% of the shares (13D/A), and directors and officers as a group own 3.1% (proxy). Richard Messina, then vice president and chief technical officer, sold 3,000 shares at $66.35 in November 2025 (Form 4).

What would change our mind

An acquisition at a price the cash flow cannot support, borrowings returning, gross margin falling back below the fourth quarter's 15.6%, or lost programs at General Motors, Ford or Stellantis.