Baron Funds, an investment management company, released its “Baron Opportunity Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund rose 4.04% (Institutional Shares), outperformed the Russell 3000 Growth Index, which gained 3.42%, and lagged the S&P 500 Index, which advanced 5.89%. In the first nine months ended 2024, the fund posted solid gains, rising 25.31% compared to a 24.00% return for the Russell 3000 Growth Index and beating the S&P 500 Index’s 22.08% gain. Due to a significant rotation away from large-cap Magnificent Seven stocks and toward value/cyclical and small-cap stocks, as well as generally positive economic data that supported the soft-landing narrative and the Federal Reserve’s long-awaited dovish pivot, U.S. stocks ended the quarter higher for the fourth consecutive quarter. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Baron Opportunity Fund highlighted stocks like Guidewire Software, Inc. (NYSE:GWRE) in its Q3 2024 investor letter. Guidewire Software, Inc. (NYSE:GWRE) offers a platform for property and casualty (P&C) insurance companies. The one-month return of Guidewire Software, Inc. (NYSE:GWRE) was 5.66%, and its shares gained 118.69% of their value over the last 52 weeks. On October 24, 2024, Guidewire Software, Inc. (NYSE:GWRE) stock closed at $188.05 per share with a market capitalization of $15.613 billion.
Baron Opportunity Fund stated the following regarding Guidewire Software, Inc. (NYSE:GWRE) in its Q3 2024 investor letter:
“Shares of P&C insurance software vendor Guidewire Software, Inc. (NYSE:GWRE) contributed to performance for the quarter. After a multi-year period, we believe the company’s cloud transition has now successfully “crossed the chasm,” as I have sometimes referred to the shift for software vendors from on-premises systems to cloud architectures. For the company’s fiscal fourth quarter, Guidewire reported an acceleration in annual recurring revenue (ARR) growth to 14%, cloud subscription revenue growth of 37%, subscription gross margins that improved by over 1,000 basis points, and cash flow from operations that beat Street estimates by over $50 million ($192 million versus $142 million). We believe that cloud will be the sole path forward for Guidewire and its customers, with ARR benefiting from new customer wins and migrations of the existing customer base to InsuranceSuite Cloud. We are also encouraged that Guidewire is running well ahead of its 2025 mid-term margin targets and delivering the inflection in free cash flow generation that we long projected. We believe that Guidewire will be the critical software vendor for the $2 trillion global P&C insurance industry, capturing 30% to 50% of its $15 billion to $30 billion total addressable market and generating margins above 40%.”
An insurance adjuster reviewing images and paperwork to process a claim.
Guidewire Software, Inc. (NYSE:GWRE) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held Guidewire Software, Inc. (NYSE:GWRE) at the end of the second quarter which was 34 in the previous quarter. Guidewire Software, Inc.’s (NYSE:GWRE) revenue for the fiscal year 2024 surpassed expectations, reaching $980 million due to robust performance across all revenue segments. While we acknowledge the potential of Guidewire Software, Inc. (NYSE:GWRE) 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 Guidewire Software, Inc. (NYSE:GWRE) and shared Conestoga Capital Advisors’ views on the company. Guidewire Software, Inc. (NYSE:GWRE) contributed to the performance of Baron Fund in the previous quarter. In addition, please check out our hedge fund investor letters Q3 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.