Baron Funds, an investment management company, released its “Baron Discovery Fund” fourth quarter 2022 investor letter. A copy of the same can be downloaded here. The fund’s performance was flat compared to the Russell 2000 Growth Index in the fourth quarter. The fund (institutional shares) returned 0.22% compared to the benchmark return of 4.13%. The fund (institutional shares) fell by 35.12% for the full year compared to a 26.36% decline for the benchmark. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Baron Discovery Fund highlighted stocks like Qualys, Inc. (NASDAQ:QLYS) in the Q4 2022 investor letter. Headquartered in Foster City, California, Qualys, Inc. (NASDAQ:QLYS) is a cloud-based information technology (IT), security, and compliance solutions provider. On February 24, 2023, Qualys, Inc. (NASDAQ:QLYS) stock closed at $118.54 per share. One-month return of Qualys, Inc. (NASDAQ:QLYS) was 5.83%, and its shares lost 5.40% of their value over the last 52 weeks. Qualys, Inc. (NASDAQ:QLYS) has a market capitalization of $4.387 billion.
Baron Discovery Fund made the following comment about Qualys, Inc. (NASDAQ:QLYS) in its Q4 2022 investor letter:
“Qualys, Inc. (NASDAQ:QLYS), a cloud-based vulnerability management cybersecurity platform, detracted from performance. While third quarter revenue and profit beat consensus expectations, billings–a forward growth indicator based on contracts–decelerated slightly as the tough macro environment caused deal scrutiny, longer sales cycles among new customers, and a slower productivity ramp-up for newly hired sales reps. Despite near-term challenges, we think Qualys can continue compounding revenue and freecash-flow-per-share growth for several reasons. First, cybersecurity is a more defensible software spending category in downturns as organizations need to continue investing in protecting their assets. Second, Qualys has made good progress in cross-selling newer products like patch management (automated remediation of known IT vulnerabilities) and cybersecurity asset management (detection of company servers where cybersecurity protection is absent or near end-of-life). New product adoption and secular growth in IT assets have led to net expansion rates (a measure of growth at existing customers) improving to 111% (compared to 104% last year). Third, management reprioritized go-to-market investments over the past year, including building better relationships with channel partners and hiring more direct sales reps in 2022, which should help drive more brand awareness and growth going forward. Lastly, management is focused on preserving Qualys’ best-in-class profitability (35% cash-flow margins) and returning capital to shareholders through share repurchases. While we acknowledge there is less certainty around near-term growth, we think this is reflected in the stock’s current valuation, and we maintain conviction in Qualys due to its solid compounding growth profile, fantastic cash-flow margins, and end-market resilience.”
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Qualys, Inc. (NASDAQ:QLYS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held Qualys, Inc. (NASDAQ:QLYS) at the end of the fourth quarter which was 25 in the previous quarter.
We discussed Qualys, Inc. (NASDAQ:QLYS) in another article and shared the list of high growth software stocks that are profitable. 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.
