Baron Funds, an investment management firm, released its “Baron Focused Growth Fund” first quarter 2023 investor letter, a copy of which can be downloaded here. During the quarter ending on March 31, 2023, the Fund’s Institutional Shares exhibited a notable increase of 14.49%. This remarkable performance can be attributed to the resilience and robust demand witnessed by companies held within the Fund’s portfolio. Spare some time to check the fund’s top 5 holdings to know more about their top bets for 2023.
In its Q1 2023 investor letter, Baron Focused Growth Fund mentioned CoStar Group Inc. (NASDAQ:CSGP) and explained its insights for the company. Founded in 1987, CoStar Group Inc. (NASDAQ:CSGP) is a Washington, D.C.-based real estate data and marketing platform with a $33.6 billion market capitalization. CoStar Group Inc. (NASDAQ:CSGP) delivered a 6.52% return since the beginning of the year, while its 12-month returns are up by 49.24%. The stock closed at $82.80 per share on June 14, 2023.
Here is what Baron Focused Growth Fund has to say about CoStar Group Inc. (NASDAQ:CSGP) in its Q1 2023 investor letter:
“Real estate data and marketing platform CoStar decreased 10.9% in the quarter and hurt performance by 55 bps. CoStar’s share price decline was due to an acceleration in its investment in its residential business. CoStar expects to more than double its residential investment from 2022 levels to approximately $500 million this year. We believe the acceleration in investment should drive organic growth on its Homes.com platform. Homes.com had just 24 million monthly active users in the first quarter versus Zillow’s 230 million users. We believe CoStar’s additional retail investment should meaningfully accelerate CoStar’s revenue growth by expanding its addressable market. We believe other investors are attributing negative equity value to this. Over the next five years, CoStar’s residential investment could add at least $1 billion to annualized revenue at a significantly accretive margin. This would result in a 50% increase in today’s $2 billion of revenue and an approximate 75% increase in EBITDA. Longer term, we believe this investment opportunity is several multiples of $1 billion of revenue. CoStar continues to see strong new bookings and strength in its retention rates, despite implementing price increases across its suite of products. It continues to have a strong balance sheet, with $5 billion of cash and just $1 billion of debt. We are not concerned with its residential investment and believe it should generate strong returns over time.”
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Our calculations show that CoStar Group Inc. (NASDAQ:CSGP) was not able to secure a spot on our list of the 30 Most Popular Stocks Among Hedge Funds. CoStar Group Inc. (NASDAQ:CSGP) was in 43 hedge fund portfolios at the end of the first quarter of 2023, compared to 46 funds in the previous quarter. CoStar Group Inc. (NASDAQ:CSGP) delivered a 21.51% return in the past 3 months.
Last month, we also shared another hedge fund’s views on CoStar Group Inc. (NASDAQ:CSGP) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters Q1 2023 page.
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Disclosure: None. This article is originally published at Insider Monkey.
