Baron Funds, an investment management company, released its “Baron Fifth Avenue Growth Fund” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. The fund increased 17.6% (Institutional Shares) in the fourth quarter compared to a 14.2% gain for the Russell 1000 Growth Index and an 11.7% increase for the S&P 500 Index. For the full year, the fund appreciated 57.6% compared to 42.7% and 26.3% returns for the indexes, respectively. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Fifth Avenue Growth Fund featured stocks such as Microsoft Corporation (NASDAQ:MSFT) in its Q4 2023 investor letter. Headquartered in Redmond, Washington, Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops, and licenses software, services, devices, and solutions. On February 22, 2024, Microsoft Corporation (NASDAQ:MSFT) stock closed at $411.65 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was 1.67%, and its shares gained 61.58% of their value over the last 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $3.059 trillion.
Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter:
“Our biggest purchase in the fourth quarter was a new position we initiated in the software platform Microsoft Corporation. While we have owned shares of Microsoft Corporation (NASDAQ:MSFT) in the large-cap core growth Baron Durable Advantage Fund, we have been reluctant to add Microsoft to this Fund for many years namely since we viewed it as a better fit for a post high-growth strategy. However, Microsoft’s transformation under the helm of Satya Nadella has changed the company’s trajectory as it went from a windows-centric, on – premises technology provider to one of the top two global cloud providers. Cloud now represents over 55% of total revenues and has been growing rapidly. Over time, Microsoft was able to build a $125 billion run-rate cloud business that is still growing at a rapid pace and continues to take market share, while becoming a more important driver for the company. For example, in the last quarterly earnings release, Microsoft Cloud grew 23% year-over-year in constant currency, significantly outpacing the company’s 12% overall constant currency growth as well as the growth of its main competitors. A 23% growth rate at this scale essentially implies that Microsoft added a run rate of around $24 billion of cloud revenues year-over-year. Just to put this in perspective, $24 billion is nearly the size of Mastercard’s business, it is over 8 times Snowflake’s total revenue and is nearly 3 times ServiceNow’s total revenue. We continue to view cloud as early in its penetration opportunity – according to latest estimates from Gartner, global cloud spend is expected to be $564 billion3 which still represents only 12% of the total $4.7 trillion worldwide IT spending.
We also believe that Microsoft is one of the best competitively positioned large-cap companies with its vertically integrated software stack (infrastructure + applications), while the inflection in the adoption of artificial intelligence (AI) and GenAI represents potentially the biggest addressable market expansion for the company in recent history. We also view Microsoft’s competitive positioning in AI as advantaged thanks to both the fact that it does not face an innovators dilemma in its core business (as compared with Alphabet’s core search business, which could potentially be at risk due to GenAI). Microsoft also has a tight partnership with OpenAI, has a large proprietary data asset built over time, and has a go-to-market advantage through a vast and robust partner ecosystem and its significant installed base and product bundling opportunities. These should enable it to cross-sell its existing user base as AI becomes embedded into current and new products…” (Click here to read the full text)
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Microsoft Corporation (NASDAQ:MSFT) is in first position on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Microsoft Corporation (NASDAQ:MSFT) was held by 302 hedge fund portfolios, down from 306 in the previous quarter, according to our database.
We discussed Microsoft Corporation (NASDAQ:MSFT) in another article and shared the list of best Dow Jones dividend stocks according to analysts. 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.
