A fertile source for undervalued ideas is identifying powerful consumer franchises hidden within a parent company with a boring or unrelated corporate name. The market often overlooks the strength of the underlying brand (e.g., Titleist golf clubs owned by Acushnet) due to this name dissociation.

Public serial acquirers like Constellation Software exploit a valuation arbitrage. They buy private niche businesses at low multiples (e.g., 5x EBITDA) which are then automatically revalued at the parent company's much higher public market multiple (e.g., 28x EBITDA), creating significant shareholder value on day one.

Monish Pabrai's successful Fiat investment reveals a powerful strategy: find hidden assets within a company. The market valued Fiat Chrysler as a single struggling automaker, but Pabrai saw that its Ferrari subsidiary was a gem being overlooked. By valuing Ferrari separately, he realized the core auto business was trading for almost nothing.

To capitalize on its deep discount to NAV, Exor employed a sophisticated reverse Dutch auction for share buybacks. This allowed the company to repurchase €1 billion in shares at the lowest prices offered by shareholders, maximizing value accretion.

Identifying a stock trading below its intrinsic value is only the first step. To avoid "value traps" (stocks that stay cheap forever), investors must also identify a specific catalyst that will unlock its value over a reasonable timeframe, typically 2-4 years.

A specific arbitrage opportunity exists with serial acquirers. When they announce a deal that will significantly increase future earnings per share, the market often under-reacts. An investor can buy shares at a compressed forward multiple before the full impact of the acquisition is priced in.

Public markets punish complexity, creating opportunities. Exor's diverse portfolio of cars, tractors, luxury goods, and media is so heavily discounted that the market value of its Ferrari stake alone is greater than the entire company's market capitalization.

Exor is strategically entering the healthcare sector not through a large acquisition, but by taking significant minority stakes in companies like Philips and Institut Mérieux. This gives them a "front row seat" to learn the industry, build knowledge, and establish credibility for a long-term pivot.

The current M&A landscape is defined by a valuation disparity where smaller companies trade at a discount to larger ones. This creates a clear strategic incentive for large corporations to drive growth by acquiring smaller, more affordable competitors.