Strong Performance Drives Optimism
Our fund saw a remarkable 28% appreciation in Q3, driven by outstanding fundamental performance across our holdings. We made key changes to our portfolio, including increasing our investment in HelloFresh and initiating a new position in First Advantage, a background check leader poised for transformative growth.
Portfolio Highlights
Our top performers this quarter were Carvana, HelloFresh, and Revolve. Carvana’s unit growth accelerated to over 30% in Q2, while achieving double the adjusted EBITDA margins of the automotive retail sector. HelloFresh showed signs of stabilization in the summer, prompting us to increase our investment, and the company has since reported better-than-expected profitability. Revolve also demonstrated strong revenue growth and expanding margins, reinforcing our investment thesis.
New Investment Opportunity
We initiated a new position in First Advantage, a leading provider of background checks. With a pending acquisition of their largest competitor, we believe First Advantage is trading at an attractive valuation of 14x 2025 earnings per share for a business that should grow earnings over 20% annually.
Latham Group: A Promising Holding
We’re excited about our investment in Latham Group, the leading manufacturer of fiberglass pools in the United States. With three revenue growth drivers – industry new pool starts, fiberglass pool penetration, and growing ancillary products – we believe Latham is set to increase earnings materially over the next 5 years. Despite the pool industry’s recent challenges, we’re optimistic about Latham’s potential for long-term revenue growth and 15-20% earnings per share growth.
Closing Remarks
We’re pleased with our holdings’ performance and optimistic about our future investment returns. If you have any questions, please don’t hesitate to reach out. Thank you for your trust and support.
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