Is FirstCash Holdings (FCFS) Poised to Benefit From The Challenging Economy?

Heartland Advisors, an investment management company, released its “Heartland Value Plus Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund declined 8.23% in the quarter, compared to a 7.7% loss for the Russell 2000 Value Index. The firm believes, this is a patient market, as expectations of better demand dynamics were put on hold during the quarter due to slowdown fears. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Heartland Value Plus Fund highlighted stocks such as FirstCash Holdings, Inc. (NASDAQ:FCFS). Headquartered in Fort Worth, Texas, FirstCash Holdings, Inc. (NASDAQ:FCFS) is a retail pawn store operator.  The one-month return of FirstCash Holdings, Inc. (NASDAQ:FCFS) was 3.39%, and its shares lost 5.66% of their value over the last 52 weeks. On April 17, 2025, FirstCash Holdings, Inc. (NASDAQ:FCFS) stock closed at $121.44 per share with a market capitalization of $5.436 billion.

Heartland Value Plus Fund stated the following regarding FirstCash Holdings, Inc. (NASDAQ:FCFS) in its Q1 2025 investor letter:

"Another defensive holding is FirstCash Holdings, Inc. (NASDAQ:FCFS), a leading operator of pawn shops in the U.S. and Latin America whose core driver of earnings is pawn loan balances. But unlike THG, which can thrive despite economic circumstances, FirstCash is positioned to do well because of the challenging economy.

Traditionally, when the consumer discretionary sector is doing poorly, as was the case in the first quarter, FirstCash often has done well. In the first quarter, the stock rose over 16.5%, making it among the top performers among our holdings. Stretched by inflation, consumers are increasingly utilizing pawn loans to cover their financial needs. Contrary to popular belief, though, pawn businesses have limited credit risk, as companies can simply keep the collateral items being held if consumers fail to pay back their loans. The stock is trading at nearly 15 times earnings and just 11 times EBITDA with a growing dividend and an active buyback program in place. We believe this valuation represents a material discount to its historical multiple."

FirstCash Holdings, Inc. (NASDAQ:FCFS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held FirstCash Holdings, Inc. (NASDAQ:FCFS) at the end of the fourth quarter which was 28 in the previous quarter. While we acknowledge the potential of FirstCash Holdings, Inc. (NASDAQ:FCFS) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered FirstCash Holdings, Inc. (NASDAQ:FCFS) and shared Fiduciary Management Inc.'s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 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.