What Makes European Wax Center (EWCZ) an Attractive Investment Opportunity?
Baron Funds, an investment management company, released its “Baron Discovery Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. Baron Discovery Fund (the Fund) reached its 10-year anniversary on September 30, 2023. Since inception, on a cumulative basis, the fund was up 195.3% (Institutional Shares) compared to the Russell 2000 Growth Index’s 91.6% return. During the quarter, the fund returned -5.36% (Institutional Shares) compared to -7.32% return for the benchmark. The bond market became the latest headwind to stock market performance in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Discovery Fund highlighted stocks like European Wax Center, Inc. (NASDAQ:EWCZ) in its Q3 2023 investor letter. Headquartered in Plano, Texas, European Wax Center, Inc. (NASDAQ:EWCZ) is a franchisor and operator of out-of-home waxing services. On November 8, 2023, European Wax Center, Inc. (NASDAQ:EWCZ) stock closed at $13.49 per share. One-month return of European Wax Center, Inc. (NASDAQ:EWCZ) was -11.54%, and its shares lost 6.51% of their value over the last 52 weeks. European Wax Center, Inc. (NASDAQ:EWCZ) has a market capitalization of $825.685 million.
Baron Discovery Fund made the following comment about European Wax Center, Inc. (NASDAQ:EWCZ) in its Q3 2023 investor letter:
"During the quarter, we added to our position in European Wax Center, Inc. (NASDAQ:EWCZ) European Wax Center is the largest and fastest-growing franchisor and operator of out-of-home waxing services in the U.S. with more than 1,000 locations. We believe European Wax Center’s scale, high-quality service, and differentiated waxing experience will enable the company to take share in the $18 billion hair removal market. As a franchisor, European Wax Center offers compelling new unit economics for franchisees with 60% cash-on-cash returns after five years. This healthy return, along with a relatively low initial investment and economic resiliency has led to a multi-year pipeline of over 400 franchisees. We believe that over time European Wax Center can grow units 10% annually with longer-term potential for over 3,000 units, roughly 3 times the current unit count. As the company’s valuation compressed during the quarter, we took advantage of this pullback to increase our position. We believe the combination of double-digit unit growth and high single-digit same-store sales growth will lead to a more than doubling of the stock price over the next five years."
European Wax Center, Inc. (NASDAQ:EWCZ) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held European Wax Center, Inc. (NASDAQ:EWCZ) at the end of second quarter which was 13 in the previous quarter.
We discussed European Wax Center, Inc. (NASDAQ:EWCZ) in another article and shared the list of best beauty stocks to buy. 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.
