FPA Queens Road Small Cap Value Fund on Upbound Group, Inc.
Thesis
Upbound provides subprime consumers with rent-to-own and point-of-sale financing through Rent-A-Center and Acima. Operations have held up in spite of consumer financial pressure, and shares appear cheap. The fund remains reluctant to add due to slow deleveraging and doubts about the resilience of the business model.
“Shares are cheap, but we have been slow to add given the company’s leverage and questions about its business model.”
Key risks
- Subprime borrowers are under stress
- Debt reduction after the Acima deal remains slow
- Questions about the underlying business model