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Is Farfetch (FTCH) a Smart Long-Term Buy?

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Polen Capital, an investment management firm, published its “Polen U.S. Small Company Growth Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. Over the first quarter, the Polen U.S. Small Company Growth Composite Portfolio (the “Portfolio”) returned -21.98% gross and -22.18% net of fees, respectively, underperforming the Russell 2000 Growth Index’s (the “Index’) -12.63% return.   Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022. 

In its Q1 2022 investor letter, Polen U.S. Small Company Growth Fund mentioned Farfetch Limited (NYSE:FTCH) and explained its insights for the company. Founded in 2007, Farfetch Limited (NYSE:FTCH) is a London, United Kingdom-based luxury fashion industry with a $3.4 billion market capitalization. Farfetch Limited (NYSE:FTCH) delivered a -73.14% return since the beginning of the year, while its 12-month returns are down by -81.10%. The stock closed at $8.98 per share on June 03, 2022.

Here is what Polen U.S. Small Company Growth Fund has to say about Farfetch Limited (NYSE:FTCH) in its Q1 2022 investor letter:

"We also initiated a position in global luxury fashion e-commerce marketplace Farfetch in the first quarter and took advantage of meaningful weakness in the company's share price during the period. Farfetch previously had too large a market cap for the Portfolio, but it has since moved to a level where it’s appropriate to own it – both in this Portfolio and in our smid-cap strategy. The company’s fundamentals remain attractive as indicated by the compelling results Farfetch reported in February.

The company remains an early mover with "the world's only truly global marketplace for luxury at scale". Farfetch has broader reach around the world with a diversity of brands that is much larger than its competitors. Many of the items it sells are exclusive. Our research shows that its brand assortment, brand image, geographic breadth, an inventory-light business model, a more compelling offering for luxury partners, and artificial intelligence are all competitive edges for the company. We believe Farfetch is well-positioned for the continued market share shift from offline to online in this category. The personal luxury goods market has trailed other categories in online penetration, but consumer behaviors and preferences shifted as a result of the pandemic creating more comfort with purchasing goods like this online. Changed behavior and the general shift to a higher portion of Millennial and Gen Z luxury shoppers supports this continued shift as does the growth in emerging market demand."

ArtStudia Group/Shutterstock.com

Our calculations show that Farfetch Limited (NYSE:FTCH) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Farfetch Limited (NYSE:FTCH) was in 45 hedge fund portfolios at the end of the first quarter of 2022, compared to 47 funds in the previous quarter. Farfetch Limited (NYSE:FTCH) delivered a -27.87% return in the past 3 months.

In May 2022, we also shared another hedge fund’s views on Farfetch Limited (NYSE:FTCH) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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