Navigating Portfolio Risk Management: Embracing Reality.

Alfonso Peccatiello's article discusses portfolio risk management, citing Steve Cohen's statistic that even the best trader only makes money 63% of the time. The article highlights the importance of accepting the hard truth about portfolio risk, including the inevitability of losses, and emphasizes the need for a disciplined approach to risk management.

Post Holdings (POST) has announced a significant shift in its capital allocation strategy, signaling a commitment to maximizing shareholder value. The company has initiated a $500 million share buyback program, funded by the proceeds from the sale of its pasta business to Richardson (US) Holdings Limited. This strategic move exemplifies a disciplined approach to portfolio optimization and risk management.

Post Holdings' share buyback program aims to reduce outstanding shares and boost earnings per share (EPS) [1]. The pasta business, which was acquired in July 2025, was deemed a non-core asset due to its lower margins and operational complexity. Its sale at a synergized acquisition multiple below 7x underscores the company's disciplined approach to resource allocation [2]. The divestiture provides immediate liquidity and allows Post Holdings to focus on higher-margin segments, such as nut butters, fruit and nut products, and granola, which are projected to contribute $45–$50 million in Adjusted EBITDA in fiscal 2026 [3].

The company's financial performance in fiscal 2025 validates its strategic choices. Post Holdings reported Adjusted EBITDA of $397 million in Q3 2025, a 13.4% year-over-year increase, and raised its full-year guidance to $1.5–$1.52 billion [4]. These results reflect improved operational efficiency and pricing power, particularly in its core categories.

However, the company's Return on Invested Capital (ROIC) of 5.19% for fiscal 2025 raises questions about the long-term sustainability of its capital allocation strategy [5]. While the ROIC is modest, it is important to contextualize this figure within the framework of Post’s restructuring efforts. The sale of the pasta business and subsequent share buybacks are designed to improve capital efficiency over time, as the company shifts toward higher-margin operations.

The Debt-to-Equity Ratio of 1.84 also highlights the risks associated with Post’s aggressive leverage [5]. Yet, the company appears to be managing this risk by using asset sales to fund buybacks rather than increasing debt levels. This approach ensures that the company maintains financial flexibility while still delivering value to shareholders.

The settlement of a $115 million lawsuit against former Credit Suisse executives further underscores the importance of effective risk management [6]. The lawsuit, led by the Employees Retirement System for the City of Providence, alleged that failures in risk management contributed to losses incurred when several counterparties defaulted. The settlement highlights the need for a disciplined approach to risk management, even in the face of adversity.

In conclusion, Post Holdings' strategic portfolio optimization and disciplined buyback program exemplify a shareholder-centric approach to capital allocation. By divesting non-core assets and reinvesting in high-margin segments, the company is not only enhancing its financial performance but also signaling confidence in its long-term value proposition. While challenges such as a modest ROIC and elevated debt levels remain, the company’s ability to execute on its restructuring plan and raise EBITDA guidance suggests a strong path forward.

References:
[1] Post Holdings Announces Sale of Pasta Business [https://www.stocktitan.net/news/POST/post-holdings-announces-sale-of-pasta-business-new-share-repurchase-5p5lcymjmoic.html]
[2] Post Holdings’ Strategic Divestiture and Share Buyback [https://www.ainvest.com/news/post-holdings-strategic-divestiture-share-buyback-signal-shareholder-focused-capital-allocation-2508/]
[3] Post Holdings Announces Sale of Pasta Business [https://www.marketscreener.com/news/post-holdings-announces-sale-of-pasta-business-new-share-repurchase-authorization-of-500-million-ce7c50dddb8df32d]
[4] Post Holdings Raises 2025 Outlook After Strong Q3 [https://www.stocktitan.net/news/POST/post-holdings-reports-results-for-the-third-quarter-of-fiscal-year-k20xy82vn3nm.html]
[5] Post Holdings (POST) Financial Ratios [https://stockanalysis.com/stocks/post/financials/ratios/]
[6] Former Credit Suisse Executives Settle $115M Lawsuit Over Risk Management [https://www.ainvest.com/news/credit-suisse-executives-settle-115m-lawsuit-risk-management-practices-2509/]