Foxhaven Asset Management was founded in 2013 by Michael Pausic and Nick Lawler. Both co-founders were former principals at Maverick Capital where they worked alongside famed Tiger Cub, Lee Ainslie. The two met during their undergraduate studies at the University of Virginia where Pausic received a BS in Engineering and Lawler received a BA in Economics. After graduation, Lawler ended up at Maverick Capital while Pausic decided to pursue an MBA at Duke University’s Fuqua School of Business. Pausic later joined Lawler at Maverick Capital.
Foxhaven specializes in technology, media, and telecommunications (TMT) and holds a concentrated portfolio with an AUM of $3.65 billion. Foxhaven has a top 10 holdings concentration of 76.01% and a top 15 holdings concentration of 92.76%. Since their inception, they have never held more than 27 positions.
Performance & Holdings Value
Foxhaven has returned a cumulative gain of 276% since Q3 of 2015, more than doubling the S&P 500’s return of 124%. In Q2 of 2021, Foxhaven returned 9.73% compared to the S&P 500’s return of 6.85%.
Red Line: Foxhaven Cumulative Return (276%)
Blue Line: S&P 500 Cumulative Return (124%)
Since their inception, Foxhaven has increased their holdings value by 1,619.02%. Foxhaven’s holdings value is near their all-time high, signaling their recent exceptional performance and bullish stance towards the market. Their holdings value increased by 5.8% compared to Q1.
Current Portfolio
Foxhaven’s top holding is Facebook, which grew revenues at their fastest pace since 2016 after reporting Q2 earnings in July. Facebook has now beaten consensus revenue estimates for 11 consecutive quarters; the last time they missed on revenue was in 2018. Since 2016, Facebook has only underperformed revenue estimates 2 times.
Facebook recently launched Horizon Workrooms, a virtual-reality remote work app that allows people to communicate with colleagues via the Oculus Quest 2 headset. Facebook is betting big on the metaverse and has invested billions into their Oculus VR headsets, AR glasses, and VR acquisitions, such as BigBox VR.
Compared to social media peers, Facebook trades at the lowest EV/ NTM Sales multiple, coming in at 7.4x. This can be somewhat attributed to Facebook’s large market cap of $1.02 trillion, which is almost 9x larger than Snapchat’s $117 billion market cap. Investors are betting that Facebook’s smaller social media peers will outperform Facebook in the long run and rewarding them with a larger multiple. Only time will tell.
Foxhaven’s second largest position is Coupang, the South Korean e-commerce giant that many have compared to an “early Amazon.” Foxhaven purchased all 8.16 million of their CPNG shares in Q1 at an estimated average price of $46.22 and didn’t change their position in Q2. CPNG trades at $32.32 today, which means Foxhaven has suffered a 30% drawdown on their position.
Coupang reported total revenues of $4.4 billion in Q2, up 71% YoY. Active customers increased to 17,022, up 26% YoY. Q2 of 2021 market the 15th consecutive quarter where Coupang grew revenues 50%+ YoY on a constant-currency basis.
However, Coupang is still operating at a loss and burning cash fast. The cash burn in Q2 is mostly attributed to investing in their grocery delivery service (Rocket Fresh) and their food delivery service (Coupang Eats). Coupang’s future success depends on how well they can convert South Korea and other countries in Southeast Asia’s TAM (total addressable market) into loyal customers. Coupang has also expanded their operations into Japan, Singapore, and Taiwan.
For fans of ESG investing, Coupang may be a great match.
“Today, more than 75% of the deliveries we process and ship are box-less in a simple sleeve with no additional cardboard, air cushions or bubble wrap. And we didn’t stop there. We asked, can we get rid of all disposable packaging? We introduced eco-bags for Rocket Fresh, which replaces nearly all disposable packaging with completely reusable bags that are picked up by our delivery network for reuse.”
-Bom Kim, CEO & Founder of Coupang
Twilio is Foxhaven’s third largest position. Twilio is an API developer platform that seeks to improve the communication between a business and their customers. Twilio’s business model utilizes CPaaS (communications platform as a service) and charges clients monthly and also for rate of use.
Twilio reported Q2 revenues of $669 million, up 67% YoY. They had 240,000 active customers, up from 200,000 a year ago. Their top 10 customers accounted for 12% of their Q2 revenue, proving that Twilio has a diverse customer base and isn’t overly reliant on one large customer.
Twilio has lost a major customer before: Uber. During their earnings call in Q1 of 2017, Twilio disclosed that Uber, which accounted for 12% of their quarterly revenue at the time, would be taking their business elsewhere and subsequently lowered their yearly sales guidance to +28%-31% YoY, missing expectations of +33%. Shares of TWLO plunged 25% to $26. Today, TWLO trades at $344.40, up 1,224% from the Uber fiasco.
Twilio’s customers keep coming back for more, as evidenced by a DBNER of 135% in Q2. Incredibly, Twilio has managed to keep their DBNER above 130% for 9 consecutive quarters.
Significant Portfolio Changes
Foxhaven made 3 new buys in Q2: AMZN, FB, and YOU. YOU was the only new position added to Foxhaven’s portfolio. YOU offers biometric identify verification through their CLEAR brand and IPO’d last June at $38.55/share. Since then, it has increased 20% to $46.50.
Fun fact: NBA legend Michael Jordan invested privately into YOU’s $100M funding round 4 months before their IPO.
Foxhaven completely liquidated their NFLX, VRM, and FISV positions and trimmed V and SMAR. Foxhaven only owned FISV for 1 quarter and sold their shares for an estimated loss of 10.2%, perhaps to fund more attractive investments.
Michael Pausic and Nick Lawler have proven to be competent investors in the hedge fund world after leaving Maverick Capital. Foxhaven is an ideal fund to analyze for long term investors since they have an average holding period of 7.79 quarters for any position they own. The average time a company is held in their top 10 positions is 6.60 quarters, while the average time held for a top 20 position is 7.2 quarters.
For Your Eyes Only - Hedge Fund Insights
Disclosure: Of the equities mentioned above, I am long FB, CPNG, TWLO, & AMZN.
Source 1 - Facebook Horizon Workrooms
Source 3 - Twilio Loses Major Client
Coupang seems to have all the aspects of a great business IMO...satisfied customers, a founder led company, and fast logistics. Only problem right now is that it seems Coupang is burning cash way too fast, which you highlighted that they invested into their grocery and food delivery program. Seems like a great business but the stock price has been painful so far. Holding my shares!