Baron Funds, an investment management company, released its “Baron Growth Fund” fourth quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund gained 11.93% (Institutional Shares) compared to a 4.13% return for the Russell 2000 Growth Index and a 7.56% return for the S&P 500 Index. Favorable stock selection led the fund to generate strong absolute and relative performance. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Baron Growth Fund highlighted stocks like MSCI Inc. (NYSE:MSCI) in the Q4 2022 investor letter. Headquartered in New York, New York, MSCI Inc. (NYSE:MSCI) is an investment decision support tools provider for clients. On February 21, 2023, MSCI Inc. (NYSE:MSCI) stock closed at $524.82 per share. One-month return of MSCI Inc. (NYSE:MSCI) was 3.18%, and its shares gained 3.03% of their value over the last 52 weeks. MSCI Inc. (NYSE:MSCI) has a market capitalization of $41.965 billion.
Baron Growth Fund made the following comment about MSCI Inc. (NYSE:MSCI) in its Q4 2022 investor letter:
“We believe that financial data and technology vendor MSCI Inc. (NYSE:MSCI) is an excellent example of the durability of recurring revenue and high retention rates across economic cycles. We estimate that approximately 97% of MSCI’s revenue comes from recurring sources. This includes 75% of revenue that comes from subscription contracts, which carry an average contract length that exceeds one year. This also includes approximately 22% of revenue from asset-based fees. Asset-based fees generate recurring revenue and are governed by multi-year contracts with the sponsor but can be impacted by fund flows and fluctuations in asset prices. Conversely, just 3% of MSCI’s revenue is non-recurring and needs to be resold in a future period.
MSCI’s aggregate retention rate was 93.0% as of its most recently reported quarter and is approximately 95.2% on a year-to-date basis. This aggregate retention rate included 96.1% in its Index segment, 93.6% in its Analytics segment, 97.2% in its ESG & Climate segment, and 94.4% in its All-Other segment. MSCI has been public since 2007, which enables us to examine its growth and retention rates over many economic cycles. Its business units and reporting lines are not identical to those disclosed 15 years ago, but we believe that they are sufficiently comparable to be indicative. Within MSCI’s flagship Index business, we find that aggregate retention rates have ranged from a trough of approximately 92% during 2009’s financial crisis to a peak around 96% in 2021 and 2022. For the company overall, aggregate retention rates have ranged from a low of 84% during the financial crisis to a high of 95% in the same years. These are remarkable retention rates that demonstrate the criticality of MSCI’s solutions and the value proposition that they generate relative to their cost. We see similar long-term evidence of durable recurring revenue with high retention rates throughout our portfolio, which gives us confidence in our investments’ ability to generate attractive financial results across cycles.
Shares of MSCI, Inc., a leading provider of investment decision support tools, contributed to performance. Despite the negative impact of broader market weakness on asset-based fee revenue, MSCI reported resilient third quarter earnings results, and the underlying business largely continued to perform well. MSCI owns strong, “all weather” franchises and remains well positioned to benefit from numerous secular tailwinds in the investment community.”
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MSCI Inc. (NYSE:MSCI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 50 hedge fund portfolios held MSCI Inc. (NYSE:MSCI) at the end of the fourth quarter which was 47 in the previous quarter.
We discussed MSCI Inc. (NYSE:MSCI) in another article and shared the list of high growth low dividend stocks to buy. In addition, please check out our hedge fund investor letters Q4 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.
