Baron Funds, an investment management company, released its “Baron Discovery Fund” fourth quarter 2022 investor letter. A copy of the same can be downloaded here. The fund’s performance was flat compared to the Russell 2000 Growth Index in the fourth quarter. The fund (institutional shares) returned 0.22% compared to the benchmark return of 4.13%. The fund (institutional shares) fell by 35.12% for the full year compared to a 26.36% decline for the benchmark. In addition, please check the fund’s top five holdings to know its best picks in 2022.
Baron Discovery Fund highlighted stocks like CyberArk Software Ltd. (NASDAQ:CYBR) in the Q4 2022 investor letter. Headquartered in Petah Tikva, Israel, CyberArk Software Ltd. (NASDAQ:CYBR) is a software-based security solutions provider. On February 24, 2023, CyberArk Software Ltd. (NASDAQ:CYBR) stock closed at $143.75 per share. One-month return of CyberArk Software Ltd. (NASDAQ:CYBR) was 4.20%, and its shares lost 15.51% of their value over the last 52 weeks. CyberArk Software Ltd. (NASDAQ:CYBR) has a market capitalization of $5.853 billion.
Baron Discovery Fund made the following comment about CyberArk Software Ltd. (NASDAQ:CYBR) in its Q4 2022 investor letter:
“We initiated a position in CyberArk Software Ltd. (NASDAQ:CYBR), an identity security platform focused primarily on privileged access management (PAM). CyberArk’s PAM technology prevents bad actors from stealing and exploiting the credentials of superuser accounts like IT administrators, cybersecurity managers, and network administrators. These privileged accounts can access a company’s most critical IT systems–domain directory servers (all passwords, profiles, and data on employees), firewalls, code repositories, and database servers–making the credentials a high-value target in ransomware attacks (consulting firm Forrester estimates that 80% of security breaches involve privileged credentials). CyberArk technology detects, stores, and manages all the privileged credentials in an organization, monitors the critical IT systems, and helps contain the damage hackers can cause if they breach a corporate network. The increasing frequency and severity of ransomware attacks, heightening geopolitical tension, and stricter requirements of cyber insurance policies have all made PAM a higher priority spending category among security teams.
CyberArk is the market leader in the PAM category, with over 20% market share. The company has successfully leveraged its foothold to expand into complementary markets like identity and access management (authentication of a company’s employees and vendors), secrets management (detection of credentials used for machine-to-machine communications), and endpoint management. These newer solutions now account for over 45% of annual subscription recurring revenue and are growing over 100% annually. CyberArk is also making good progress in its business model transition from on-premise (one-time perpetual license payment plus some recurring maintenance payments) to a recurring subscription revenue model. The new model expands CyberArk’s addressable market, enables it to cross-sell products more efficiently, increases the lifetime value of its customers, and improves revenue predictability. Recurring revenue now accounts for more than 84% of total sales and annualized recurring revenue has been growing over 40% for the past four quarters. As subscription contracts come up for renewal in the next two to three years, we expect cash-flow margins to increase from mid-single digits today to CyberArk’s healthy historical margin levels of 20%-plus. Long term, the combination of resilient end-market growth, better recurring revenue mix, and margin expansion should bode well for the stock.”
CyberArk Software Ltd. (NASDAQ:CYBR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held CyberArk Software Ltd. (NASDAQ:CYBR) at the end of the fourth quarter which was 32 in the previous quarter.
We discussed CyberArk Software Ltd. (NASDAQ:CYBR) in another article and shared Brown Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 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.
