Baron Funds, an investment management firm, released its “Baron Global Advantage Fund” third quarter 2023 investor letter, a copy of which can be downloaded here. During the third quarter of 2023, the Baron Global Advantage Fund®, denoted as the “Fund,” experienced a 6.1% loss for its Institutional Shares. This performance can be compared to the 3.4% losses of the MSCI ACWI Index, known as the “Benchmark,” and the 4.9% losses for the MSCI ACWI Growth Index, which serves as the Fund’s benchmarks. Take a moment to review the fund’s top 5 holdings to gain insights into their primary investment choices for 2023.
In its Q3 2023 investor letter, Baron Global Advantage Fund mentioned Coupang, Inc. (NYSE:CPNG) and explained its insights for the company. Coupang, Inc. (NYSE:CPNG) is a Seattle, Washington-based e-commerce company with a $29.7 billion market capitalization. Coupang, Inc. (NYSE:CPNG) delivered a 13.53% return since the beginning of the year, while its 12-month returns are down by -5.81%. The stock closed at $16.70 per share on November 6, 2023.
Here is what Baron Global Advantage Fund has to say about Coupang, Inc. (NYSE:CPNG) in its Q3 2023 investor letter:
“Coupang is a leading Korean e-commerce company founded in 2010. It went public in March of 2021, and we have been investors in this Fund since the IPO. After spending half a day with management, touring the company’s fulfillment center, asking questions, and learning more about the reasons behind the remarkable success the company has achieved over the last 13 years, we decided we wanted to own it in this Fund as well. When we originally invested in Coupang, our thesis was constructed around the company’s wide product selection, low prices, and unrivaled convenience thanks to its investments in an end-to-end infrastructure that covers over 70% of Korea’s population, enabling over 99% of orders to be delivered within one day or less, rather than the industry norm of two to three days, driving customer satisfaction, which translates to higher customer retention rates and lifetime value. We thought that Coupang would continue to gain market share in the U.S. $500 billion-plus Korean retail market, while expanding its offerings into additional categories, expanding its ecosystem via a third-party marketplace, and continuing to invest in infrastructure density to further capture inefficiencies, enhancing the customer experience, and improving profit margins. The company has since outperformed our expectations, growing its market share to 25% (#1 in the industry), despite not being a first mover, while building an unrivaled user experience with 99.8% of products delivered the next day (with the majority of them by dawn) and becoming profitable significantly faster than we expected. Our biggest takeaway from the visit was that despite all of Coupang’s success, there is still a long runway of growth ahead. For example, while most of the facility we visited is operated with pickers going to shelves to pick up items for orders, there was one room in which shelves drove themselves to pickers on the back of autonomous robots, which increased picker productivity by 3x. Additionally, while Coupang has been striving to reduce its reliance on distributors, which enables them to expand margins while lowering prices for consumers, a significant opportunity remains for further reduction. Lastly, we got plenty of examples of out-of-the-box thinking (no pun intended) from the company’s singulation process (improves the picking process by reducing the constraint to search for items order by order), decreasing use of boxes (80% of shipments are now boxless), enabling grocery delivery without cold-chain logistics (thanks to end-to-end supplychain efficiency), or how Coupang is able to fill trucks so that each carries more than 2x the parcels a UPS or a FedEx truck can, despite being half the size. The 4% free-cash-flow yield, which is also negatively impacted by the significant reinvestments the company is making into its emerging offerings, also contributed to our decision to add to our Coupang position upon returning to New York.
An e-commerce platform displaying a wide range of products to customers online.
Our calculations show that Coupang, Inc. (NYSE:CPNG) does not belong on our list of the 30 Most Popular Stocks Among Hedge Funds. Coupang, Inc. (NYSE:CPNG) was in 47 hedge fund portfolios at the end of the second quarter of 2023, compared to 47 funds in the previous quarter. Coupang, Inc. (NYSE:CPNG) delivered a -7.22% return in the past 3 months. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q3 2023 page.
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Disclosure: None. This article is originally published at Insider Monkey.
