Patient Capital Management, a value investing firm, released its “Patient Capital Opportunity Equity Strategy” third quarter 2023 investor letter. A copy of the same can be downloaded here. During the quarter the strategy returned -6.0% net of fees compared to the S&P 500’s -3.3% return. As the quarter demonstrated, the markets are uncertain. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Patient Capital Management highlighted stocks like Farfetch Limited (NYSE:FTCH) in its Q3 2023 investor letter. Headquartered in London, the United Kingdom, Farfetch Limited (NYSE:FTCH) is an online marketplace for luxury goods. On November 1, 2023, Farfetch Limited (NYSE:FTCH) stock closed at $1.47 per share. One-month return of Farfetch Limited (NYSE:FTCH) was -19.23%, and its shares lost 81.46% of their value over the last 52 weeks. Farfetch Limited (NYSE:FTCH) has a market capitalization of $581.335 million.
Patient Capital Management made the following comment about Farfetch Limited (NYSE:FTCH) in its Q3 2023 investor letter:
“Farfetch Limited (NYSE:FTCH) was exited in the quarter following continued disappointment in cash flow generation combined with their ever -expanding debt balance. From this point, we see serious balance sheet risk for the first time, causing us to question if the company will be able to achieve their long-term plan. We took the opportunity to realize tax losses and will continue to re-evaluate the name. More details on FTCH below.
Farfetch Ltd (FTCH) was our largest detractor in the quarter as the company massively disappointed expectations, while increasing their debt load. The lack of results and dramatic change in the risk profile over the last year forced us to reconsider the viability of our long-term thesis. With the additional $600M in term loan debt drawn down over the last year and the constant delays in true free cash flow generation (operating cash flow (operating cash flow (OCF)-capital expenditure (CAPEX)) the risk profile of the company has drastically changed from when we first owned it. From a strategic standpoint, the company has made great progress signing new deals, bringing on new partners and proving the value of their offering but their operational performance and financial discipline has sorely disappointed. While the entry of Tim Stone as CFO in September will certainly help the company, we don’t have conviction it will be enough. Debt and interest expense ($100M/annually) have exploded. Limited cash on hand ($753M by year-end), continued cash burn, a risk of a recession and $1B in debt maturities due in 2027, make us concerned about the company’s ability to invest behind and deliver against their long-term targets. We used the opportunity to take tax losses while continuing to re-evaluate the situation.”
A customer using their phone to access an online commerce platform.
Farfetch Limited (NYSE:FTCH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Farfetch Limited (NYSE:FTCH) at the end of second quarter which was 39 in the previous quarter.
We discussed Farfetch Limited (NYSE:FTCH) in another article and shared Polen U.S. SMID Company Growth Strategy’s views on the company. 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.
