Baron Funds, an investment management company, released its “Baron Growth Fund” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the fund gained 7.88% (Institutional Shares) which exceeded the primary benchmark the Russell 2000 Growth Index’s 6.07% return. It also outperformed the S&P 500 Index’s 7.50% return. The sudden bank failures raised concerns about the health of the US regional banking system. The fund doesn’t own any investments in banks for the past 11 years. The company is focused on investing in businesses with durable competitive advantages. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Growth Fund highlighted stocks like FactSet Research Systems Inc. (NYSE:FDS) in the first quarter 2023 investor letter. Headquartered in Norwalk, Connecticut, FactSet Research Systems Inc. (NYSE:FDS) provides integrated financial information, analytical applications, and services. On June 12, 2023, FactSet Research Systems Inc. (NYSE:FDS) stock closed at $400.28 per share. One-month return of FactSet Research Systems Inc. (NYSE:FDS) was 1.07%, and its shares gained 13.47% of their value over the last 52 weeks. FactSet Research Systems Inc. (NYSE:FDS) has a market capitalization of $15.339 billion.
Baron Growth Fund made the following comment about FactSet Research Systems Inc. (NYSE:FDS) in its first quarter 2023 investor letter:
“One of our largest and longest held financials positions is FactSet Research Systems Inc. (NYSE:FDS). We estimate that the company serves an addressable market that exceeds $32 billion of annual recurring revenue. This is almost 16 times larger than its current size, offering a long runway for sustained growth. We believe that FactSet has built a highly differentiated portfolio of products, underpinned by unique data and analytics, expertise in data cleansing and concordance, a unique open-architecture approach, and best-in-class customer service. FactSet customers use the product as their primary workflow or analytics tool, creating sticky and visible revenue streams that have enjoyed retention rates above 95% for decades. FactSet is highly profitable, with EBIT margins of approximately 35%, and robust free-cash-flow generation.
FactSet’s management team exclusively focuses on driving sustainable long-term growth. For example, three years ago the company announced a $100 million investment program to be incurred over three years. FactSet’s investments were designed to collect proprietary data about private markets, to collect “deep sector” information, and to enhance the breadth and depth of its digital platform. While the investment reduced earnings in the short term, the investment has generated attractive returns for shareholders. Today, FactSet’s rate of organic growth is approximately double its pre-investment level, its margins have mostly recovered, and its competitive positioning has been structurally enhanced.
We initially invested in FactSet in 2006. Over that period, FactSet has grown its revenue by 4.8 times and its EPS by 6.3 times, which corresponds to a 10% CAGR in revenue and a 12% CAGR in earnings. This consistent and recurring growth has generated a 14.9% CAGR in the stock since our initial purchase, exceeding the benchmark by 7.1% annually. We expect the company to generate similarly consistent financial results going forward and are optimistic that shares will respond similarly.”
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FactSet Research Systems Inc. (NYSE:FDS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held FactSet Research Systems Inc. (NYSE:FDS) at the end of first quarter 2023 which was 38 in the previous quarter.
We discussed FactSet Research Systems Inc. (NYSE:FDS) in another article and shared the list of best consistent dividend stocks to buy. In addition, please check out our hedge fund investor letters Q1 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.
