Here’s Why Palm Valley Capital Fund Added Utz Brands (UTZ) to Its Portfolio

"During the fourth quarter, we bought three new positions: Domino’s Pizza Group plc (ticker: DOM LN), Utz Brands, Inc. (NYSE:UTZ), and Ingredion (ticker: INGR). As has been the case for several years, our initial weightings in new names have been fairly modest because most of them were just reaching our minimum required discount. Founded in 1921, Utz Brands, Inc. is a leading U.S. manufacturer of salty snacks, including potato chips, tortilla chips, pretzels, cheese snacks, and pork skins. Its portfolio includes bands such as Utz, Zapp’s, On The Border, Golden Flake, and Boulder Canyon. Utz has invested heavily in productivity initiatives and geographic expansion. As a result, capital expenditures have been elevated, averaging $100 million annually over the past two years. High investment spending and growth have contributed to above average financial leverage as well. Looking ahead, management expects capital expenditures to normalize in 2026, declining to $60-$70 million per year. Combined with the proceeds from facility sales, the reduction in spending should allow for debt to decline soon. As a salty snack business, Utz enjoys attractive margins, consistent demand, and strong free cash flow potential. Utz is well positioned with several brands delivering healthy organic growth that are gaining market share. Boulder Canyon chips, in particular, have performed exceptionally well over the past year, benefiting from consumer demand for “better-for you” snacks made with non-seed oils. We are attracted to Utz’s steady business, improving free cash flow, and a balance sheet that we believe will improve considerably over the next year. At the time of purchase, the shares traded at approximately 12x our 2026 free cash flow estimate and offered a 2.6% dividend yield."