Baron Funds, an investment management company, released its “Baron Small Cap Fund” fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. Baron Small Cap Fund had a strong fourth quarter and a full year in 2023, both on absolute and relative bases. The fund was up 12.64% (Institutional Shares) in the fourth quarter and appreciated 27.19% for the year. This was essentially in line with the performance of the Russell 2000 Growth Index (the Benchmark) in the fourth quarter, which was up 12.75% and outperformed the 11.69% returns of the S&P 500 Index. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Small Cap Fund featured stocks like NCino, Inc. (NASDAQ:NCNO) in the fourth quarter 2023 investor letter. Headquartered in Wilmington, North Carolina, NCino, Inc. (NASDAQ:NCNO) is a software-as-a-service company. On February 26, 2024, NCino, Inc. (NASDAQ:NCNO) stock closed at $29.86 per share. One-month return of NCino, Inc. (NASDAQ:NCNO) was -8.43%, and its shares gained 9.58% of their value over the last 52 weeks. NCino, Inc. (NASDAQ:NCNO) has a market capitalization of $3.378 billion.
Baron Small Cap Fund stated the following regarding NCino, Inc. (NASDAQ:NCNO) in its fourth quarter 2023 investor letter:
“This quarter we initiated a position in NCino, Inc. (NASDAQ:NCNO), a leading provider of cloud-based banking software that was founded in 2012. The company’s platform helps more than 1,850 global financial institutions modernize their processes around client onboarding and account opening, making loans, and managing loans after they have been originated. NCino’s solutions support a large majority of customers at a financial institution, including commercial, small business, consumer, and mortgage customers.
NCino operates in a large market – the addressable market is approximately $10 billion in the Americas and $18.5 billion on a global basis – and has achieved high levels of customer satisfaction as evidenced by a strong net promoter score of 74 and very little voluntary churn. The company’s solutions are deeply embedded in customer workflows and generate a strong return on investment in the form higher revenue from more loans, lower costs from a reduction in paper-based processes, faster decision making, and improved efficiency with the ability to consolidate several legacy systems. Relative to the competition, nCino’s solution has several advantages, including operating a cloud-native single platform (built on top of Salesforce) that is free from legacy tech debt, having a well-known brand that is highly regarded in the marketplace (especially strong in commercial banking), and a long history of successful deployments with an impressive roster of customers (institutions like Bank of America, Wells Fargo, Barclays, Fifth Third, and many others) who can then serve as reference accounts.
NCino is well positioned to drive mid-teens or greater organic revenue growth for many years driven by a combination of growth with existing clients (even within its large U.S. customers, we estimate that nCino is only around mid-20% penetrated today), increasing penetration of nIQ (data analytics and machine learning products), continuing to win new commercial clients, gaining traction in newer end-markets like consumer loans and mortgages, and ramping its international expansion. The company is already seeing good success in the U.K., Canada, New Zealand, Japan, and several countries in continental Europe. The company has also started to ramp its margin profile, but we see a path for additional margin expansion from the low double-digit range today up to 30% to 35% operating margins over time. We believe there is a long runway for profitable growth for nCino, as banks and other financial institutions choose it as a partner to help digitize and transition to the cloud.”
A financial professional utilizing a cloud-based software application.
NCino, Inc. (NASDAQ:NCNO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, NCino, Inc. (NASDAQ:NCNO) was held by 20 hedge fund portfolios, up from 19 in the previous quarter, according to our database.
We discussed NCino, Inc. (NASDAQ:NCNO) in another article and shared ClearBridge Small Cap Growth Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2023 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.
