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 Ibotta, Inc. (NYSE:IBTA) in its Q2 2024 investor letter. Ibotta, Inc. (NYSE:IBTA) is a technology company that enables consumer packaged goods brands to deliver digital promotions to consumers through the Ibotta Performance Network (IPN). The one-month return of Ibotta, Inc. (NYSE:IBTA) was -14.71%, and its shares lost 42.23% of their value over the last 3 months. On August 5, 2024, Ibotta, Inc. (NYSE:IBTA) stock closed at $59.14 per share with a market capitalization of $1.615 billion.
Baron Small Cap Fund stated the following regarding Ibotta, Inc. (NYSE:IBTA) in its Q2 2024 investor letter:
“We initiated a position in Ibotta, Inc. (NYSE:IBTA) in its April IPO. Ibotta offers cashback rewards on various purchases through its Ibotta Performance Network (IPN) and direct-to-consumer app. Ibotta partners with retailers (e.g., Family Dollar and Kroger) who want to offer loyalty programs, and earns money from brands (e.g., Nestle and Unilever) who want to offer digital cashback rewards on their products. For example, brands find these cashback rewards useful as a measurable way to attract customers away from private label brands and launch new items. Ibotta gets paid on a measurable basis, averaging $0.80 per cashback redemption. In total, Ibotta serves over 2,400 brands, and through its third-party retailer network, reaches over 200 million potential end consumers (“redeemers”). Given the scalability of offering online rewards across its platform, Ibotta has a highly profitable and cash flow generative model, with 70% incremental margins in its third-party business.
Ibotta was founded in 2011 as a direct-to-consumer app in a highly competitive space. In 2021, Ibotta began powering cashback rewards programs with the IPN for large third-party retailers, which is a much faster growing space and is already half of Ibotta’s revenue today. To date, Ibotta has credited American consumers with $1.8 billion in cash rewards through its network. With the IPN, Ibotta competes in a very large, digital total addressable market, and we believe that Ibotta, which enables effective return on brand spending, has significant room to grow from a base of $320 million in revenue in 2023….” (Click here to read the full text)
A businesswoman using her mobile device to shop on a ecommerce platform.
Ibotta, Inc. (NYSE:IBTA) is not on our list of 31 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of Ibotta, Inc. (NYSE:IBTA) 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.