Baron Funds, an asset management firm, published its “Baron Small Cap Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. Baron Small Cap Fund (the “Fund”) did poorly in the first quarter, on both an absolute and relative basis. The Fund was down 15.68% (Institutional Shares), trailing the Russell 2000 Growth Index, which lost 12.63%, and the S&P 500 Index, which fell 4.60%. The Fund’s longer-term performance is still admirable gaining 10.76% per year, on an annualized basis, over its almost 25-year history and besting the returns of its benchmark index for all relevant time periods. 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 Small Cap Fund mentioned Progyny, Inc. (NASDAQ:PGNY) and explained its insights for the company. Founded in 2008, Progyny, Inc. (NASDAQ:PGNY) is a United States-based fertility benefits management company with a $3.2 billion market capitalization. Progyny, Inc. (NASDAQ:PGNY) delivered a -30.13% return since the beginning of the year, while its 12-month returns are down by -38.73%. The stock closed at $35.18 per share on May 20, 2022.
Here is what Baron Small Cap Fund has to say about Progyny, Inc. (NASDAQ:PGNY) in its Q1 2022 investor letter:
“We recently established a position in Progyny, Inc. (NASDAQ:PGNY), a benefits management company specializing in fertility and family benefits solutions to large, selfinsured employers in the U.S. We believe that such benefits provide access to clinically effective treatments, ensure healthier outcomes for employees, and lower an employer’s overall health care spending. We believe the fertility benefit’s uptake is accelerating, as companies seek to gain an edge in the war for talent and employee retention.
Launched in 2016, Progyny has become the brand of choice in the $7 billion fertility treatment market, amassing over 265 employer clients (including Google, Microsoft, 3M, and Unilever), up from 80 at its IPO in 2019, representing 4 million covered lives. Yet this represents a mere 3% of Progyny’s target market, which is poorly served by managed care providers, giving the company a considerable growth runway. Since inception, its revenues are up five-fold, from $105 million to $500 million in 2021, with positive EBITDA, steady margin expansion, and a high rate of cash flow conversion.
Infertility is a significant societal/workforce issue, affecting one in eight U.S. couples according to the CDC. Its incidence is growing with the rising age of women pursuing pregnancy. Progyny allows a company to offer all its employees, regardless of sexual orientation or marital status, a more comprehensive fertility benefit than that afforded by traditional insurance. Among Progyny’s many advantages is a network of independent fertility clinics that, utilizing the most current diagnostics and technology, consistently achieve better outcomes than national averages. A proprietary and differentiated treatment bundle, called the “Smart Cycle,” is designed to give a doctor and patient the most appropriate and tailored approach to treatment choices rather than the more typical one-size-fits-all step therapy (where patient’s benefits often run out before a pregnancy is achieved). An integrated pharmacy, with now over 90% client take rate, provides both lower costs and greater convenience, and high touch concierge support and counseling rounds out Progyny’s value proposition. Progyny has high patient satisfaction, nearly 100% client retention rates, and healthier live singleton birthrates, while lowering the riskier, costlier multiple births frequently associated with fertility treatments. With greater adoption of the benefit and further market penetration, including recent expansion into Canada, we see potential for Progyny to grow its top line CAGR at approximately 35% for the next three to four years, scaling the business both rapidly and profitably, with EBITDA margins expanding from current low teens to around 20%.”
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Our calculations show that Progyny, Inc. (NASDAQ:PGNY) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Progyny, Inc. (NASDAQ:PGNY) was in 26 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 28 funds in the previous quarter. Progyny, Inc. (NASDAQ:PGNY) delivered a -5.28% return in the past 3 months.
In April 2022, we also shared another hedge fund’s views on Progyny, Inc. (NASDAQ:PGNY) 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.
