The Misfits: FirstCash Holdings (FCFS)

A case study in why not all investors should fear disruption at first glance.

An Arab Market, Benjamin Jean Joseph Constant, oil on canvas

Few words describe investing in the 21st century better than disruption.

The Internet age was ushered in around the turn of this century. 25 years later, depending on who you ask, we are on the precipice of two monumental technology disruptions: Artificial Intelligence and quantum computing.

Private credit, fintech companies, and blockchain ventures are all vying to disrupt some aspect of banking, finance, and investing.

Disruption is one of the four horsemen of a portfolio apocalypse (along with inflation, recessions, and our own stupidity). Whenever we construct an investment thesis, the risk section always asks, “How does this industry get disrupted, and how long will it take?”

Assessing disruption risk is critical, but we often fear the amorphous concept of disruption rather than the specific dangers disruption poses to mature businesses.

Admittedly, this is a strange way to start a discussion about North America’s largest pawn shop owner, FirstCash Holdings (NASDAQ: FCFS). But considering the spectacular returns it has generated and the recent fintech disruption (Buy Now, Pay Later) threatening one of its business lines, it seems as good a business as any to examine how we evaluate disruption as a threat. 

Let’s dig into the good, the bad, and the misunderstood aspects of FirstCash and look at how we can better refine our assessment of disruption.

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