Alta Fox Capital Management, an investment management firm, released its third quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund returned 6.43% gross and 5.88% net compared to -3.27% and -5.13% returns for the S&P 500 and Russell 2000 Indexes, respectively. The Fund’s average net exposure during the quarter was 86.43%. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Alta Fox Capital highlighted stocks like FirstCash Holdings, Inc. (NASDAQ:FCFS) in the third quarter 2023 investor letter. Headquartered in Fort Worth, Texas, FirstCash Holdings, Inc. (NASDAQ:FCFS) is a retail pawn stores operator. On November 3, 2023, FirstCash Holdings, Inc. (NASDAQ:FCFS) stock closed at $109.10 per share. One-month return of FirstCash Holdings, Inc. (NASDAQ:FCFS) was 7.48%, and its shares gained 15.60% of their value over the last 52 weeks. FirstCash Holdings, Inc. (NASDAQ:FCFS) has a market capitalization of $4.921 billion.
Alta Fox Capital made the following comment about FirstCash Holdings, Inc. (NASDAQ:FCFS) in its Q3 2023 investor letter:
“FirstCash Holdings, Inc. (NASDAQ:FCFS) is a new position in the Alta Fox portfolio and is a good example of a business in our counter-cyclical theme. It is a high-quality business with an excellent track record of compounding value for shareholders at a discounted multiple to historical levels despite likely accelerating near-term fundamentals.
FCFS is the largest pawn shop operator in the fragmented US & Mexican markets and well over 2x the size of its closest competitor. At scale, pawn shops tend to be excellent businesses due to limited competition (high regulatory barriers to entry at the local level) and their unique ability to provide fully collateralized short-term financing. Current management has run this business for decades, boasting an impressive total shareholder return since IPO in 1994 of 17.5% per year vs the S&P 500 at 10.0%.
We believe this is a particularly compelling time to invest in FCFS. The pawn shop industry has faced decade-long cyclical headwinds driven by low interest rates and full employment. Macro is now turning into a tailwind as dwindling consumer savings balances coupled with increasingly restrictive access to credit has significantly improved pawn shop demand. After a decade of approximately flat pawn loans outstanding per store, FCFS’s Q3 23 showed accelerating double-digit y/y growth in this metric, which hit all-time highs in the quarter. We believe this critical KPI is poised to grow significantly over the coming years and will result in earnings significantly ahead of current sell side estimates. At a historically cheap multiple of <16x NTM PE on consensus numbers that appear too conservative, we believe FCFS is well positioned to deliver attractive shareholder returns for the foreseeable future. Equally as important, the business is very defensive and can outperform in a variety of market environments.”
A senior banker signing a loan document, emphasizing the company’s ability to finance mortgages.
FirstCash Holdings, Inc. (NASDAQ:FCFS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held FirstCash Holdings, Inc. (NASDAQ:FCFS) at the end of second quarter which was 13 in the previous quarter.
We discussed FirstCash Holdings, Inc. (NASDAQ:FCFS) in another article and shared the list of fastest growing fintech companies in 2023. In addition, please check out our hedge fund investor letters Q3 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
