180 Degree Capital Corp., an investment management firm, recently released its fourth quarter 2023 investor letter. A copy of the same can be downloaded here. This recession has caused investors to move their capital away from risky assets to safer ones. Despite predictions of a return to higher interest rates, the economy has not suffered any major setbacks. Instead, GDP has risen by 3.1%, wages and salaries have grown by 4.7%, real private fixed investment in manufacturing structures has reached record highs, and employment rates remain strong. In the fourth quarter of 2023, there was a positive change in the market as it believes that investors will start to take more risks, including investing in microcapitalization stocks. The Fund’s public portfolio had a gross total return of +6.9%, which was the main reason for the increase in NAV per share from $4.91 to $5.02. For more information on the fund’s top picks in 2023, please check its top five holdings.
180 Degree Capital Corp. featured stocks like Potbelly Corporation (NASDAQ:PBPB) in the fourth quarter 2023 investor letter. Based in Chicago, Illinois, Potbelly Corporation (NASDAQ:PBPB) owns and operates Potbelly sandwich restaurants. On March 5, 2024, Potbelly Corporation (NASDAQ:PBPB) stock closed at $13.60 per share. One-month return of Potbelly Corporation (NASDAQ:PBPB) was 10.03%, and its shares gained 53.85% of their value over the last 52 weeks. Potbelly Corporation (NASDAQ:PBPB) has a market capitalization of $399.28 million.
180 Degree Capital Corp stated the following regarding Potbelly Corporation (NASDAQ:PBPB) in its fourth quarter 2023 investor letter:
“We have been investors in Potbelly Corporation (NASDAQ:PBPB) since 2019. PBPB is a fast-casual restaurant chain that sells sandwiches, salads, soups and other lunch focused items at company-owned and franchised locations. We have discussed PBPB in detail in prior shareholder letters and whitepapers, so we won’t rehash the entire story here aside from saying we believe PBPB has strong brand recognition, high-quality products, a healthy balance sheet and one of the best management teams we have ever invested in. PBPB has 425 locations, including 75 franchised in 33 states plus the District of Columbia. Additionally, PBPB recently announced that it has development agreements for almost 200 additional shops.
For 2024, we see several potential value-creating catalysts that we believe could push the stock price substantially higher. First, the company has said that it expects to open 40 new franchise stores this coming year, which represents close to 10% growth. Additionally, PBPB is projecting continued growth in average unit volume, shop level margins and adjusted EBITDA margins. Lastly, management expects material generation of positive cash flows that will enable various options for capital allocation including repayment of expensive debt, stock buybacks and/or other forms of return of capital.
Investors are starting to wake up to PBPB’s momentum entering 2024. Should this momentum continue, we believe that PBPB will command a common franchise-level multiple of enterprise value to EBITDA in the mid-to-high teens from its current low teens multiple. This multiple expansion combined with the cash flow and earnings power of the remade business could lead to further material appreciation in PBPB’s common stock.”
A chef in a busy kitchen, adding the finishing touches to a signature sandwich.
Potbelly Corporation (NASDAQ:PBPB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Potbelly Corporation (NASDAQ:PBPB) was held by 10 hedge fund portfolios, down from 12 in the previous quarter, according to our database.
We discussed Potbelly Corporation (NASDAQ:PBPB) in another article and shared Artko Capital’s views on the company. In addition, please check out our hedge fund investor letters Q4 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
