Baron Funds: “HealthEquity (HQY) is Now Trading at a Reasonable Multiple of Lower Estimates”

Baron Funds, an asset management firm, published its “Baron Small Cap Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. A return of 4.69% was delivered by the fund’s institutional shares for the fourth quarter of 2021 and 15.84% for the year. This well exceeded the returns of the Russell 2000 Growth Index (the “Index”), which was flat in the fourth quarter and up 2.83% for the year. This was a quarter and a year where small-cap stocks did worse than large caps. The S&P 500 Index gained 11.03% in the quarter and 28.71% for the year. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022

Baron Small Cap Fund, in its Q4 2021 investor letter, mentioned HealthEquity, Inc. (NASDAQ: HQY) and discussed its stance on the firm. HealthEquity, Inc. is a Draper, Utah-based health care company with a $4.8 billion market capitalization. HQY delivered a 29.97% return since the beginning of the year, while its 12-month returns are down by -32.46%. The stock closed at $57.50 per share on February 11, 2022.

Here is what Baron Small Cap Fund has to say about HealthEquity, Inc. in its Q4 2021 investor letter:

“HealthEquity, Inc. administers Health Savings Accounts (“HSAs”) and other consumer-directed benefits. Shares fell in the quarter when revenues and earnings missed investor estimates, and management lowered guidance. The company’s core HSA business has continued to grow in line with expectations, but some of the ancillary businesses that the company acquired in the WageWorks deal are not doing well. This caused total sales and profits to be flat. Much of the shortfall was caused by business conditions resulting from the pandemic. The stock is now trading at a reasonable multiple of lower estimates, and the business should benefit from higher interest rates.”

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Our calculations show that HealthEquity, Inc. (NASDAQ: HQY) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. HQY was in 26 hedge fund portfolios at the end of the third quarter of 2021, compared to 20 funds in the previous quarter. HealthEquity, Inc. (NASDAQ: HQY) delivered a -15.04% return in the past 3 months.

In November 2021, we published an article that includes HQY in the 10 New Stocks Reddit’s WallStreetBets is Buying. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

Disclosure: None. This article is originally published at Insider Monkey.