Baron Funds, an asset management firm, published its “Baron Real Estate Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. The Baron Real Estate Fund (the “Fund”) declined 10.76% (Institutional Shares) in the first quarter of 2022, modestly outperforming its primary benchmark, the MSCI USA IMI Extended Real Estate Index (the “MSCI Real Estate Index”), which declined 11.03%. The Fund underperformed the MSCI US REIT Index (the “REIT Index”), which declined 4.28%. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Baron Real Estate Fund mentioned GDS Holdings Limited (NASDAQ:GDS) and explained its insights for the company. Founded in 2001, GDS Holdings Limited (NASDAQ:GDS) is a Shanghai, China-based data center developer operator with a $5.8 billion market capitalization. GDS Holdings Limited (NASDAQ:GDS) delivered a -38.30% return since the beginning of the year, while its 12-month returns are down by -58.88%. The stock closed at $29.10 per share on May 20, 2022.
Here is what Baron Real Estate Fund has to say about GDS Holdings Limited (NASDAQ:GDS) in its Q1 2022 investor letter:
“Following a 66% correction in its share price from a peak of $117 per share in February 2021, we recently reacquired shares in GDS Holdings Limited (GDS) at an average cost of $39 per share. GDS is the leading developer and operator of data centers in China. Following several years of strong share price performance, the shares of GDS corrected sharply in 2021 due to investor concerns about China’s increased regulatory scrutiny of the technology industry and a slowdown in its economy, increased competition, evidence of further tensions with U.S. regulatory agencies, and a substantial correction in technology shares broadly. At our average purchase price of $39, we believe these concerns are sufficiently discounted in the shares and remain optimistic about the company’s long-term potential to generate strong growth and increase the intrinsic value of the business.
In February 2021, three highly respected institutional investors-Sequoia China, ST Telemedia Global Data Centers, and an Asian sovereign wealth fund-invested $620 million dollars in GDS at a slight premium to the Fund’s purchase price. This was a major vote of confidence in the management team and the growth opportunity ahead (we suspect there is meaningful additional capital available to support GDS’s expansion plan should volatility in the public equity markets persist). We continue to believe that GDS is well positioned to benefit from the Chinese digital economy, which is in its early growth phase, with relatively low national internet access penetration and expectations for ongoing strong growth in public cloud spending.
GDS’ shares are valued at a discounted cash flow multiple to its global data center peers despite the fact that the company is projected to grow its cash flow 3 to 4 times faster over the next few years.”
Our calculations show that GDS Holdings Limited (NASDAQ:GDS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. GDS Holdings Limited (NASDAQ:GDS) was in 26 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 24 funds in the previous quarter. GDS Holdings Limited (NASDAQ:GDS) delivered a -31.67% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on GDS Holdings Limited (NASDAQ:GDS) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
