Garrett Motion Q1 2026 Update
Selling is the hardest part, even (particularly?) when it is a 4x.
Article Type: Idea Update
Market Capitalization: $6.1b
Average Daily Trading Volume: 2.5m shares
Disclaimer: I currently do not own shares of Garrett Motion. I may decide to purchase or sell shares at any time without prior notice. Do your own research and size positions appropriately if you invest. Nothing here is meant to be understood as investment or financial advice. AI tools assist my research and writing process, enhancing analytical efficiency and clarity. Investing bears risk, such as loss of principal.
TL;DR
The company continues its strong operational performance, but it amdittedly benefited from FX tailwinds.
Since the start of the year, shares have re-rated sharply. This compressed the underlying levered FCF yield, which is why I exited my position. Since my initial write-up shares roughly quadrupled.
The bull case still pencils out very strong returns, but requires some assumptions and conditions that are currently difficult for me to underwrite. The base case still promises satisfactory performance, but I will wait for a potential pull back in share prices.
Introduction
Author’s note: I am currently traveling and thus this piece is slightly shorter than usual.
Another good quarter, a series of positive announcements, and the shares have risen markedly since the start of the year. Considering the run-up (shares are now up ~300% compared to my initial write-up, and this does not take into account the collected dividends), I cut my position as the FCF yield compressed notably compared to when I initially analyzed the company in September 2024 (16% vs 6.6% now). I will continue to follow the company, as I am pleased with the operating performance, and might consider re-entering a position when valuation, operations, and future prospects align.
For reference and context, my prior article:
