Baron Funds, an investment management company, released its “Baron Discovery Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund (Institutional Shares) declined 7.78% underperforming the 2.92% return for the Russell 2000 Growth Index. The lion’s share of negative attribution and 6.52% of negative performance of the fund during the quarter were attributed to the ten worst-performing equities. The firm believes downward movements are more technically tied to macroeconomic issues and the trading environment and could quickly revert. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Discovery Fund highlighted stocks like Astera Labs, Inc. (NASDAQ:ALAB) in the second quarter 2024 investor letter. Astera Labs, Inc. (NASDAQ:ALAB) manufactures and distributes semiconductor-based connectivity solutions for cloud and AI infrastructures. The one-month return of Astera Labs, Inc. (NASDAQ:ALAB) was -9.22%, and its shares lost 41.98% of their value over the last three months. On August 23, 2024, Astera Labs, Inc. (NASDAQ:ALAB) stock closed at $41.77 per share with a market capitalization of $6.544 billion.
Baron Discovery Fund stated the following regarding Astera Labs, Inc. (NASDAQ:ALAB) in its Q2 2024 investor letter:
“AI models are rapidly moving from objects of curiosity to levels of functionality that just a couple of years ago were believed to exist only in the realm of science fiction. We obviously do not invest in large-cap companies that produce AI hardware, which is where significant market attention is focused right now. Yet we continue to look for exciting small-cap ideas in AI hardware. For example, we owned a small-cap AI-oriented semiconductor company in the second quarter called Astera Labs, Inc. (NASDAQ:ALAB). Astera Labs manufactures analog semiconductors that facilitate improved communications within a motherboard (for example between graphics processing units like what NVIDIA makes and central processing units which are made by companies like Intel), and between servers. We bought shares when the company went public, but due to the incredible hype surrounding hardware-based AI companies, the stock quickly doubled and exceeded what we believed was a reasonable long-term valuation (particularly given new competitive offerings on the horizon). Therefore, we sold our investment but continue to monitor its valuation closely for a potential re-entry point.”
A close-up view of a computer motherboard with integrated semiconductor chips.
Astera Labs, Inc. (NASDAQ:ALAB) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held Astera Labs, Inc. (NASDAQ:ALAB) at the end of the second quarter which was 28 in the previous quarter. Astera Labs, Inc.’s (NASDAQ:ALAB) revenue for the second quarter was $76.9 million, showing an 18% increase from the previous quarter and a 619% increase from Q2 2023. While we acknowledge the potential of Astera Labs, Inc. (NASDAQ:ALAB) 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 discussed Astera Labs, Inc. (NASDAQ:ALAB) and shared the list of best new stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 2024 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.