Baron Funds, an investment management company, released its “Baron Discovery Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. Baron Discovery Fund (the Fund) reached its 10-year anniversary on September 30, 2023. Since inception, on a cumulative basis, the fund was up 195.3% (Institutional Shares) compared to the Russell 2000 Growth Index’s 91.6% return. During the quarter, the fund returned -5.36% (Institutional Shares) compared to -7.32% return for the benchmark. The bond market became the latest headwind to stock market performance in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Discovery Fund highlighted stocks like 10x Genomics, Inc. (NASDAQ:TXG) in the Q3 2023 investor letter. Headquartered in Pleasanton, California, 10x Genomics, Inc. (NASDAQ:TXG) is a science technology company. On November 8, 2023, 10x Genomics, Inc. (NASDAQ:TXG) stock closed at $37.93 per share. One-month return of 10x Genomics, Inc. (NASDAQ:TXG) was -2.62%, and its shares gained 0.29% of their value over the last 52 weeks. 10x Genomics, Inc. (NASDAQ:TXG) has a market capitalization of $4.443 billion.
Baron Discovery Fund made the following comment about 10x Genomics, Inc. (NASDAQ:TXG) in its Q3 2023 investor letter:
“We initiated a position in 10x Genomics, Inc. (NASDAQ:TXG), a company that sells innovative instruments and reagents for life sciences research. The company’s first platform, the Chromium, is dominant within the single-cell space. The Chromium utilizes advanced microfluidics to separate a sample into individual cells. Each cell is enveloped in its own droplet, where an individual reaction occurs to detect the expression profile of that cell. This occurs in parallel across tens of thousands of droplets, enabling high-throughput and granular characterization of a sample. 10x Genomics’ second platform is the Visium platform for spatial analysis. Visium employs a slide with many small dots (55 microns in diameter), each of which has a unique barcode. The barcodes are read by next-generation sequencing equipment. This enables researchers to detect expression patterns (genetic behavior) across geographic regions of a tissue sample. Finally, the company is launching its third major platform, the Xenium for in-situ analysis. The in-situ platform allows researchers to visualize biomarkers of interest right on the tissue slide, in real time. The images are processed on-instrument versus Visium, which requires barcodes that a separate sequencer reads.
Our conviction in 10x Genomics is driven by multiple growth drivers over the next several years. First, for the single-cell platform, the company has a new kit called Flex that enables sample multiplexing and working with FFPE (preserved) samples. We think this opens up translational studies that rely on archival samples. This marks an opportunity to expand into biopharmaceuticals (whereas historically the company has been predominantly conducting basic research). Second, we think there is upside from the new product cycle with the in-situ Xenium. We believe the platform is differentiated by its throughput, paired with a panel approach that allows customers to add customization to their research projects. In the near term,10X Genomics’ margins may be pressured by the bolus of Xenium boxes being placed, which are generally, lower-margin razors. This will eventually lead to a stream of consumables (razor blades) sales at much higher margins. We like 10x Genomics as a high-quality life science research company with multiple shots on goal. The company has a strong balance sheet with $400 million in cash and no debt, and with visibility to FCF breakeven in the near term. We see 10x Genomics as a consistent double-digit grower, with over 80% of revenues coming from high-margin and recurring consumables, roughly 70% gross margins, and a path to over 30% EBITDA margins longer term.”
Close up of a chemist in a lab coat holding a beaker, surrounded by sophisticated life science equipment.
10x Genomics, Inc. (NASDAQ:TXG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held 10x Genomics, Inc. (NASDAQ:TXG) at the end of second quarter which was 22 in the previous quarter.
We discussed 10x Genomics, Inc. (NASDAQ:TXG) in another article and shared the list of top genomics companies in the world. In addition, please check out our hedge fund investor letters Q3 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.
