Brown Capital Management, an investment management company, released its “The Brown Capital Management Mid Company Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Mid Company Fund (Institutional shares) returned 5.21% in the quarter underperforming the 9.50% return for the Russell Midcap Growth Index. The strategy focuses on companies that offer mission-critical products and services that save time, lives, money, and headaches. In addition, check the fund’s top five holdings to know its best picks in 2024.
The Brown Capital Management Mid Company Fund highlighted stocks like Fair Isaac Corporation (NYSE:FICO), in the first quarter 2024 investor letter. Fair Isaac Corporation (NYSE:FICO) develops analytic, software, and digital decision-making technologies and services. The one-month return of Fair Isaac Corporation (NYSE:FICO) was 4.68%, and its shares gained 86.97% of their value over the last 52 weeks. On June 24, 2024, Fair Isaac Corporation (NYSE:FICO) stock closed at $1,441.50 per share with a market capitalization of $35.861 billion.
The Brown Capital Management Mid Company Fund stated the following regarding Fair Isaac Corporation (NYSE:FICO) in its first quarter 2024 investor letter:
“Fair Isaac Corporation (NYSE:FICO) is a leading analytics and software company. The company’s proprietary FICO Score serves as the gold standard for analyzing consumer-credit risk. This scoring system is so integral to risk management that it is used in 90% of consumer-lending decisions in the U.S., and the FICO Score is synonymous with credit assessment. It is indispensable for a broad spectrum of financial players, including banks, insurers, auto dealers, credit card issuers and investors. The FICO Score’s deep integration into both the financial system and minds of consumers underscores its critical importance for the operation of businesses in the U.S. mortgage ecosystem. Despite its pivotal role, the cost of obtaining a FICO Score—typically just a few dollars—is negligible compared to the overall costs of credit applications, such as mortgage origination costs in the thousands of dollars or credit decisions involving millions, making it an exceptional value. As a result of its entrenched role in the consumer-credit approval processes and strong value proposition, the company has substantial pricing power, high margins and strong cash flow.
The FICO Scores business is complemented by several software solutions that help financial services companies manage risk and improve customer engagement. These offerings include several strong franchises that are central to mission-critical client operations, including the industry’s dominant credit-card fraud detection and account management solutions. The company is also making a multiyear investment to shift from on-premise solutions to a more recurring and profitable Software-as-a-Service (SaaS) cloud business model with its integrated FICO Platform that is replacing Fair Isaac’s legacy software solutions. Over the next three to five years, the company should grow organic sales at 10% or better annually, while margin expansion should generate even faster earnings-per-share growth. Over the longer term, the company’s dominant and defensible position should enable it to extend its leadership position in the credit scoring and analytics industry, creating sustainable and recurring revenue growth for years.”
A hands-on approach: technicians working on data management products in an open lab space.
Fair Isaac Corporation (NYSE:FICO) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held Fair Isaac Corporation (NYSE:FICO) at the end of the first quarter which was 49 in the previous quarter. Fair Isaac Corporation’s (NYSE:FICO) revenues in the second fiscal quarter of 2024 were $434 million, reflecting a 14% increase compared to the prior-year’s quarter. While we acknowledge the potential of Fair Isaac Corporation (NYSE:FICO) 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.
We discussed Fair Isaac Corporation (NYSE:FICO) in another article and shared the list of largest companies in the US. In addition, please check out our hedge fund investor letters Q1 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.