Baron Funds, an investment management company, released its “Baron Opportunity Fund” third quarter 2022 investor letter. A copy of the same can be downloaded here. In the third quarter, the fund declined 2.38% (Institutional Shares) compared to a 3.37% decline for the Russell 3000 Growth Index and a 4.88% decline for the S&P 500 Index. The fund fell sharply for the year-to-date and trailing 12-month periods; however, the philosophy of the fund is to achieve strong long-term performance. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Baron Funds discussed stocks like Cloudflare, Inc. (NYSE:NET) in the Q3 2022 investor letter. Headquartered in San Francisco, California, Cloudflare, Inc. (NYSE:NET) is cloud services provider. On October 31, 2022, Cloudflare, Inc. (NYSE:NET) stock closed at $56.32 per share. One-month return of Cloudflare, Inc. (NYSE:NET) was -6.94% and its shares lost 70.72% of their value over the last 52 weeks. Cloudflare, Inc. (NYSE:NET) has a market capitalization of $18.443 billion.
Here is what Baron Funds specifically said about Cloudflare, Inc. (NYSE:NET) in its Q3 2022 investor letter:
“We continued to build our position in Cloudflare, Inc. (NYSE:NET) during the quarter as the shares declined with the overall software space and the long-term risk/ reward balance became more compelling. The company reported a strong second quarter, with revenue growth accelerating to 54%, as well as better gross and operating margins. Third quarter guidance was also ahead of Wall Street expectations. Given Cloudflare’s proprietary network and massive global scale, its software products have a disruptive price-performance advantage over competitors. As the company introduces new products as well as disruptive packaging/pricing, its unit level economics should continue to improve over time, with the company already well ahead of its long-term gross margin target of 74%, reporting 78.9% for the second quarter. This drives strong cross/upselling activity with customers, reflected in strong net-dollar expansion rates in excess of 125%. Indeed, in the most recent quarters, customers purchasing five or more products reached 81% of the base, six or more products reached 70% of the base, and seven or more products reached 58% of the base. Enterprise penetration continues to be a key long-term driver, with 1,749 customers now spending over $100,000 annually with the company, growing 61% and now accounting for over 60% of total revenue. With approximately 152,000 paying customers at the end of last quarter, large enterprise customers still represent just 1% of total paid customers and thus a material growth opportunity in the coming years. We continue to have high confidence in the company’s ability to innovate at a rapid pace (announced 20 new products or enhancements in September alone), package and bundle with disruptive pricing, and take material share in its large and growing addressable markets.”
Cloudflare, Inc. (NYSE:NET) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held Cloudflare, Inc. (NYSE:NET) at the end of the second quarter which was 44 in the previous quarter.
We discussed Cloudflare, Inc. (NYSE:NET) in another article and shared the best content delivery network stocks to invest in. In addition, please check out our hedge fund investor letters Q3 2022 page for more investor letters from hedge funds and other leading investors.
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