Why Oldfield Partners' Strategic Addition to Lear Stock Signals Undervaluation and Growth Potential

In the ever-evolving landscape of value investing, the recent strategic move by Oldfield Partners to significantly increase its stake in Lear Corporation (NYSE: LEA) offers a compelling case study. The firm's decision to add 33,313 shares of Lear in the third quarter of 2025, elevating its position to 644,286 shares valued at $73.84 million, underscores a calculated bet on undervaluation and sector resilience. This analysis explores how Oldfield's approach aligns with value investing principles and the automotive sector's shifting dynamics.

A Value Investing Playbook: Oldfield's Strategic Lens

Oldfield Partners has long championed value investing, prioritizing companies with robust fundamentals and discounted valuations. As Richard Oldfield highlighted at the 2025 London Value Investor Conference, the firm's focus on non-US equities and undervalued assets reflects a belief in markets where "bubble characteristics" are absent. Lear, a global automotive parts supplier, fits this mold. Despite a 34% stock price surge over the past year, the firm views Lear as attractively priced, with an enterprise value-to-EBITDA (EV/EBITDA) ratio of 5.6 and a price-to-sales (P/S) ratio of 0.29- both below their five-year averages. These metrics suggest the stock remains undervalued relative to its historical performance and industry peers.

Lear's Financial Resilience Amid Sector Headwinds

Lear's Q3 2025 results highlight its ability to navigate a challenging automotive sector. The company reported $5.7 billion in revenue, a 2% year-over-year increase, driven by new business wins in its Seating and E-Systems segments. Free cash flow surged to $307 million in the quarter, a stark improvement from $51 million in Q3 2024, while share repurchases totaled $100 million, signaling disciplined capital allocation.

However, Lear's gross profit margin of 6.4% lags behind the industry median of 16.3%, reflecting cost pressures in its operations. This discrepancy, while concerning, aligns with Oldfield's value investing ethos: identifying companies with strong cash flows but temporarily depressed margins due to macroeconomic or sector-specific challenges. A discounted cash flow analysis further supports this view, estimating Lear's fair value at $141 per share-16.6% above its current price of $117.

Sector Positioning: Navigating the EV Transition

The automotive sector is undergoing a seismic shift toward electrification, a trend that has pressured traditional automakers and suppliers alike. Lear, however, is proactively adapting. Its E-Systems segment, which focuses on EV-related components, secured $1.1 billion in business awards in 2025, accounting for 25% of its revenue. This strategic pivot positions Lear to benefit from the long-term growth of electric vehicles while mitigating risks from legacy production declines.

Oldfield Partners' historical investments in automotive giants like General Motors and Toyota demonstrate its confidence in the sector's resilience. By doubling down on Lear-a company with both established Seating segment dominance and emerging EV capabilities-the firm is betting on a hybrid model that balances near-term stability with long-term innovation.

A Contrarian Edge in a Cyclical Sector

Oldfield's decision to increase its Lear position despite a 34% stock price rise in 2025 reflects a contrarian approach. While growth stocks have underperformed due to prolonged low interest rates, value-oriented investors like Oldfield see opportunity in companies with strong balance sheets and undervalued metrics. Lear's price-to-earnings (PE) ratio of 13.7x, below the industry average of 19.8x, further reinforces this thesis.

Moreover, Lear's full-year 2025 revenue guidance of $22.85 billion to $23.15 billion, coupled with core operating earnings projections of $995 million to $1.055 billion, suggests a path to margin expansion. The company's $250 million share repurchase program, announced in Q3, underscores its commitment to shareholder returns and signals management's confidence in its financial position.

Conclusion: A Value-Driven Bet on Automotive's Future

Oldfield Partners' strategic addition to its Lear position is a testament to the enduring power of value investing. By leveraging Lear's undervalued metrics, sector expertise, and EV transition readiness, the firm is positioning itself to capitalize on both cyclical recovery and long-term structural growth. As the automotive industry navigates the transition to electrification, companies like Lear-those with strong fundamentals, disciplined capital allocation, and strategic adaptability-may emerge as the most compelling value propositions.