Is Karooooo Ltd. (KARO) a Smart Value Investment?

SaltLight Capital Management, an investment management company, released its third-quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund returned -10.10%. The global market fluctuations affected the fund’s performance in the third quarter. The fund’s investment in concentrated portfolio businesses can result in higher volatility, but better returns may also offset volatility. In addition, please check the fund’s top five holdings to know its best picks in 2022.

In the third-quarter letter, SaltLight Capital discussed stocks like Karooooo Ltd. (NASDAQ:KARO). Headquartered in Singapore, Karooooo Ltd. (NASDAQ:KARO) is a mobility SaaS platform provider. On November 11, 2022, Karooooo Ltd. (NASDAQ:KARO) stock closed at $22.49 per share. One-month return of Karooooo Ltd. (NASDAQ:KARO) was -2.85% and its shares lost 34.92% of their value over the last 52 weeks. Karooooo Ltd. (NASDAQ:KARO) has a market capitalization of $696.09 million.

SaltLight Capital made the following comment about Karooooo Ltd. (NASDAQ:KARO) in its Q3 2022 investor letter:

“Karooooo Ltd. (NASDAQ:KARO), a large weighting, is a victim of illiquidity. Karooooo is 80% held by the founder and over the last quarter, a mere 1.8% of its total shares outstanding have traded.

Due to the low free float, the benchmark index rules down-weight its benchmark representation to the point that our data shows only one ETF holds it. It is unlikely that our ‘benchmark-focused’ peers would ever own this type of business.

This is unfortunate for them because Karooooo has very favourable business economics. Every year it earns a 25-30% return on net worth and gushes cash because it does not require substantial capital to earn an incremental dollar. Today, it has around R1bn of cash on hand and should grow at 15% in tough years and 25% in good years…” (Click here to read the full text)

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Karooooo Ltd. (NASDAQ:KARO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 3 hedge fund portfolios held Karooooo Ltd. (NASDAQ:KARO) at the end of the second quarter which was 4 in the previous quarter.

We discussed Karooooo Ltd. (NASDAQ:KARO) in another article and shared Polen Capital’s views on the company. In addition, please check out our hedge fund investor letters Q2 2022 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.