Baron Funds, an investment management company, released its “Baron Small Cap Fund” second-quarter 2024 investor letter. A copy can be downloaded here. The fund returned -6.43% (Institutional Shares) in the quarter trailing the Russell 2000 Growth Index’s -2.92 % return and the broader Russell 3000 Index’s 3.22% return. The technology-heavy NASDAQ Composite Index and the broader indices hit record highs in the second quarter. Still, the rally was extremely focused and narrow, with the mega-cap Magnificent Seven’s consistently excellent performance accounting for all of the larger-cap index gains while small-cap stocks declined. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Small Cap Fund highlighted stocks like Loar Holdings Inc. (NYSE:LOAR) in its Q2 2024 investor letter. Loar Holdings Inc. (NYSE:LOAR) designs, manufactures, and markets aerospace and defense components. The one-month return of Loar Holdings Inc. (NYSE:LOAR) was 4.47%, and its shares gained 16.20% of their value over the last 3 months. On August 5, 2024, Loar Holdings Inc. (NYSE:LOAR) stock closed at $57.90 per share with a market capitalization of $5.194 billion.
Baron Small Cap Fund stated the following regarding Loar Holdings Inc. (NYSE:LOAR) in its Q2 2024 investor letter:
“We initiated a position in Loar Holdings Inc. (NYSE:LOAR) as part of the company’s IPO. Founded in 2012, Loar is a niche aerospace parts manufacturer with an 85% proprietary portfolio and over half of revenue focused on the high margin aftermarket channel. Loar’s business comprises roughly 15,000 products with around 1,400 employees and 12 manufacturing locations. We believe Loar can grow revenue 10% organically supplemented by a disciplined acquisition strategy that has allowed the integration of 16 acquisitions over the past 12 years. This exceptionally strong M&A franchise has been integral to the 38% sales and 46% EBITDA CAGR since inception. Given secular aerospace tailwinds, strength of the business model, and a management team with over a decade of proven success, we see a long runway of growth ahead for the company to compound EBITDA organically in the mid-teens with a potential double-digit addition from M&A.”
A complex assembly line producing aircraft structures for aerospace applications.
Loar Holdings Inc. (NYSE:LOAR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of Loar Holdings Inc. (NYSE:LOAR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q2 2024 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.