Chase Coleman may not be a name you are familiar with but he has the hallmarks of being the next Warren Buffett, at least in terms of net worth. It’s been reported that Buffett’s net worth increased from $30 million to $100 million from age 40 to 50. Most of the Oracle of Omaha’s wealth was accumulated after the age of 50, in fact a full 99% of it.
At 48, Coleman already has a net worth estimated at $8.5 billion. If his wealth accumulation rivals that of Buffett, he would dwarf Buffett’s wealth by the same age.
So what does Coleman do that made him so successful? He founded Tiger Global Management after first serving under the famous Julian Robertson of Tiger Management in 1997.
Clearly, Coleman had made the right investing moves over his career to end up so wealthy, but what is he exposed to now? We examine one his most undervalued positions, ATRenew (NYSE:RERE).
What Does ATRenew Do?
ATRenew has flown under the radar of many investors but not Coleman. The company specializes in recycling used electronic devices. Think about an old phone or laptop that you have which doesn’t work any more. Instead of discarding it, you could take it to ATRenew in order to fix the them, and they in turn sell them on to other buyers.
If a gadget or device is broken and cannot be fixed, ATRenew will take it apart and separate the materials, like metals and plastics, in order to build new things.
Just as companies like Autotrader have enjoyed enormous success trading in used cars, and ThredUp in facilitating the purchase of used clothes, ATRenew has a specialty focus on all things electronic.
What Makes ATRenew So Special?
At first glance, it’s not apparent why ATRenew stands out, but a closer look reveals its competitive edge.
The company uses cutting-edge technology to efficiently recycle electronics, allowing it to dismantle and process e-waste more efficiently and precisely than traditional methods. The approach ensures the company can recover more materials from each device, and so increases profitability and environmental benefits all at once.
By leveraging this technology it can also recover a wider range of materials, such as gold, silver and platinum, as well as rare earth elements that are both valuable and can be reused in manufacturing new electronics.
One standout concern for corporate and personal sellers of devices to ATRenew is data security. On that front, the company is known to use advanced data destruction methods to securely erase device data prior to recycling.
The technology approach used by the company also facilitates recycling at scale and makes it possible to adapt to different types of e-waste, ensuring the company itself remains relevant as underlying devices evolve.
Why Did Chase Coleman Buy ATRenew?
Most likely, Chase Coleman bought ATRenew stock because it has a partnership with Apple to recycle electronic devices and has grown revenues by 29.5% over the last twelve months.
The Apple partnership to recycle iPhones means predictable revenues can be forecast long into the future and has already yielded success. Plus, the collaboration is forecast to substantially boost sales in coming years.
The recycling firm is expanding its scope beyond iPhone to include Android products, too. It’s also broadening its focus from simply buying and selling secondhand smartphones to refurbishing them, leading to higher profit potential.
But management is not content to sit on their laurels, and have expanded into lower-tech consumer products, too, like luxury good and even gold.
So how has all this translated to financial success?
Top Line Is Growing Consistently
Evidence of how well ATRenew’s business model is resonating with customers can be seen on the top line, which has grown year-over-year for eleven quarters in a row, at a rapid pace.
The growth has been consistent too. For example, YoY revenue growth in the past four quarters has been reported at 22.4%, 30.2%, 38.1% and 28.4% respectively.
Disappointingly, operating income has been consistently in the red also, but appears to be on the verge of moving into the black with just $8.6 million in losses last quarter.
With no long-term debt to speak of and $196 million in cash on the balance sheet, it’s clear that management is not only excelling on growing the company but keeping a fortress balance sheet too.
Trading at just 0.2x sales and down 40% year-to-date, it seems like a bargain may be on the table for investors, so is it on sale?
How Analysts Rate ATRenew?
Over the past six months, ATRenew share price is down by 39.6% and therein lies a potential opportunity for value investors.
Running a 5-year discounted cash flow forecast analysis reveals significant upside potential to $3.37 per share, representing close to 100% upside if realized.
Only one analyst covers the stock, but the fair value assessment they have placed on RERE is significantly higher at $11.52 per share.
With consistently rising revenues, a partnership with Apple, and extensions of services lines, it seems ATRenew has all the hallmarks of becoming a profitable investment for medium to long-term shareholders.
But it’s not going to be a cakewalk. The share price typically has been volatile so it tends to be a stomach-churning ride to hold onto it and the turbulent financial ratios don’t help matters. Return on invested capital is in the red by 9.4% while return on equity is -47.6%.
And with no earnings to speak of it’s hard to build a case on valuation at this point in time.
Is ATRenew a Buy or Sell?
Clearly, Chase Coleman knows a thing or two about building enormous wealth by investing in smart plays and ATRenew is among the most undervalued positions in his Tiger Global Management portfolio.
With that said he has committed less than half of one percent to the position so, on the one hand, he has enough conviction to buy the stock, but on the other not enough to bet big on it.
Perhaps that’s the smartest approach to investing in ATRenew, a small allocation, so if it turns out to be huge winner it can materially benefit a portfolio but if it doesn’t come to fruition it won’t have a substantial impact.
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