Baron Funds, an investment management company, released its “Baron Discovery Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. Compared to the Russell 2000 Growth Index benchmark, which was slightly positive, the fund (institutional shares) was flat in the third quarter. In addition, please check the fund’s top five holdings to know its best picks in 2022.
In the third-quarter letter, Baron Funds discussed stocks like CareDx, Inc (NASDAQ:CDNA). Headquartered in South San Francisco, California, CareDx, Inc (NASDAQ:CDNA) is a global provider of diagnostic solutions for transplant patients and caregivers. On October 28, 2022, CareDx, Inc (NASDAQ:CDNA) stock closed at $19.81 per share. One-month return of CareDx, Inc (NASDAQ:CDNA) was 16.39% and its shares lost 61.16% of their value over the last 52 weeks. CareDx, Inc (NASDAQ:CDNA) has a market capitalization of $1.059 billion.
Baron Funds made the following comment about CareDx, Inc (NASDAQ:CDNA) in its Q3 2022 investor letter:
“We purchased additional shares of CareDx, Inc (NASDAQ:CDNA), a diagnostic company that facilitates organ donor matches pre-transplant and rejection monitoring post-transplant. Transplant rejection testing is recurring and can help ensure the right immunosuppressant treatment to avoid overdosage or organ loss. Shares underperformed for the quarter. The company is facing reimbursement headwinds as it moves beyond traditional Medicare and into the growing Medicare Advantage market and commercial payer markets for patients who do not qualify for Medicare. It is providing tests into these commercial markets basically for free in order to gain first mover advantage and on a delayed reimbursement basis because while Medicare Advantage payers are required to pay, they put up administrative hurdles that slow the process considerably. So even though test volume for CareDx was up 21% in the second quarter due to increased market penetration of the company’s cutting-edge DNA tests, the overall average selling price per test (ASP) was down 14%, leading to overall revenue growth of only 9%. This ASP headline has spooked the market, leading to a trading multiple as low as we have ever seen. While we acknowledge this overhang may take time to navigate, we think the company’s competitive position within this diagnostic niche is not being sufficiently appreciated. CareDx has a first mover advantage, has embedded its tests into large centers’ protocols, and offers intensive patient support. We also believe the randomized controlled trials the company is running can help add to the body of clinical evidence supporting its tests and will support its push for more reimbursement coverage. Kidney transplant monitoring is a $2 billion market into which CareDx is less than 15% penetrated, so we think there is plenty of runway for growth.”
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CareDx, Inc (NASDAQ:CDNA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held CareDx, Inc (NASDAQ:CDNA) at the end of the second quarter which was 19 in the previous quarter.
We discussed CareDx, Inc (NASDAQ:CDNA) in another article and shared small-cap stock picks of Cathie Wood’s 2022 portfolio. In addition, please check out our hedge fund investor letters Q3 2022 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.
