Baron Funds, an investment management company, released its “Baron Fifth Avenue Growth Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund increased 3.6% (Institutional Shares) in the third quarter compared to a 3.2% gain for the Russell 1000 Growth Index and a 5.9% increase for the S&P 500 Index. Year to date, the fund returned 23.3% compared to 24.6% and 22.1% gains for the indexes. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Fifth Avenue Growth Fund highlighted stocks like KKR & Co. Inc. (NYSE:KKR) in the third quarter 2024 investor letter. KKR & Co. Inc. (NYSE:KKR) is an equity and real estate investment firm. The one-month return of KKR & Co. Inc. (NYSE:KKR) was 19.05%, and its shares gained 116.52% of their value over the last 52 weeks. On November 29, 2024, KKR & Co. Inc. (NYSE:KKR) stock closed at $162.87 per share with a market capitalization of $147.675 billion.
Baron Fifth Avenue Growth Fund stated the following regarding KKR & Co. Inc. (NYSE:KKR) in its Q3 2024 investor letter:
“During the quarter, we also initiated a new position in KKR & Co. Inc. (NYSE:KKR), one of the largest alternative asset managers in the world with $601 billion of assets under management (AUM). We believe alternative asset management is one of the best secular growth areas of financial services, and KKR should be a prime beneficiary. Founded in 1976 as one of the earliest leveraged buyout firms, KKR was led for decades by co-founders Henry Kravis and George Roberts. Since going public in 2010 as a pure-play private equity (PE) firm, KKR has successfully diversified into other private asset classes, including private credit, real estate, and infrastructure investing. AUM has risen nearly 10-fold since 2010 (an 18% CAGR), and PE’s share of firm AUM has shrunk to less than one-third. These non-PE asset classes are less penetrated than PE and provide a substantial runway for KKR to continue growing its funds, fees, and earnings. KKR also has significant growth opportunities in Asia, which it first entered in 2005 and where alternative asset management is far less penetrated compared to Western countries. In 2021, KKR successfully transitioned leadership from Kravis and Roberts to co-CEOs Scott Nuttall and Joe Bae, longtime KKR employees responsible for many of the growth initiatives that are driving KKR’s success today.
In addition to its globally diversified asset management business, KKR has significant exposure to the growth of private credit through its ownership of Global Atlantic, an insurance company with $183 billion of AUM. Global Atlantic is a beneficiary of the shift of illiquid credit assets into the private markets where they are better matched from a funding duration perspective and can deliver higher yields than publicly traded fixed income securities with the same credit ratings. KKR also has a strategic holdings segment that includes co-investments in a portfolio of high-quality businesses managed by KKR’s PE funds. These balance sheet investments should generate a durable stream of earnings and dividends for KKR that will be reinvested back into the business or returned to shareholders. We believe the company’s above-market growth is enabled by its brand, track record of strong returns, proven management team, deep client relationships, and diversified business which gives the company more growth avenues compared to peers. At the company’s Investor Day in April, management guided to 20% annualized growth in fee-related earnings and 30% annualized growth in earnings per share, reaching $7 to $8 by 2026. KKR management expects earnings to more than quadruple to over $15 per share within 10 years, representing a 16% CAGR. We think KKR’s diversified platform of leading businesses gives the company multiple ways to grow earnings as they execute into the expanding market for alternative assets, which should bode well for the stock over the long run.”
A modern looking financial adviser sitting in front of a trading monitor, gesturing to a group of investors.
KKR & Co. Inc. (NYSE:KKR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 66 hedge fund portfolios held KKR & Co. Inc. (NYSE:KKR) at the end of the third quarter which was 75 in the previous quarter. While we acknowledge the potential of KKR & Co. Inc. (NYSE:KKR) 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 another article, we discussed KKR & Co. Inc. (NYSE:KKR) and shared Greenhaven Road Capital’s views on the company. Alphyn Capital Management commented on KKR & Co. Inc.’s (NYSE:KKR) impressive performance in its Q3 2024 investor letter. In addition, please check out our hedge fund investor letters Q3 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.