Is Karooooo (KARO) A Great Long-Term Investment?

Desert Lion Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A net return of -9.9% was delivered by the fund for the third quarter of 2021. Desert Lion Capital’s horizon is longer than average, and the portfolio turnover is fairly low at less than 20% per annum. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Desert Lion Capital, in its Q3 2021 investor letter, mentioned Karooooo Ltd. (NASDAQ: KARO) and discussed its stance on the firm. Karooooo Ltd. is a Singapore-based software company with a $1.0 billion market capitalization. KARO delivered a 9.81% return for the past month, and it closed at $35.11 per share on December 28, 2021.

Here is what Desert Lion Capital has to say about Karooooo Ltd. in its Q3 2021 investor letter:

“A Day 1 holding for the Fund, Karooooo is a SaaS company that maximizes the value of data collected from the monitoring and tracking of mobile assets (anything from mega mining trucks to scooters, generators, and even prisoners).

The company reported H1 results for the period ended August 2021, performing in line with all our key metrics. Subscription numbers are growing at 20%, as is subscription revenue. Recurring revenue constitutes 97% of total revenue. The GP margin was 70% and the EBITDA margin was 45%. Customer life cycle remained stable at 60 months, giving a LTV/CAC of 4.5 times.

Karooooo management keeps evolving and innovating. According to CEO Zak Calisto, they are now thinking beyond connected vehicles and believe that there is significant untapped network value in the business. For example, its new vertical – an online vehicle trading platform called Carzuka – will disrupt the used vehicle market by marketing, trading, financing, and insuring used vehicles with a complete telematics tracking history. Carzuka is currently gaining traction in in beta phase and is expected to launch in Q4 2022…” (Click here to see the full text)

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Based on our calculations, Karooooo Ltd. (NASDAQ: KARO) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. KARO was in 4 hedge fund portfolios at the end of the third quarter of 2021, compared to 5 funds in the previous quarter. Karooooo Ltd. (NASDAQ: KARO) delivered a 22.63% return in the past 3 months.

In September this year, we also shared Desert Lion Capital‘s Q2 2021 views on KARO in another article. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q3 page.

Disclosure: None. This article is originally published at Insider Monkey.