Baron Funds, an investment management firm, released its “Focused Growth Fund” second quarter 2023 investor letter, a copy of which can be downloaded here. The fund advanced 7.38% (Institutional Shares) in the second quarter. The fund’s primary benchmark rose 6.41% during the same period and the S&P 500 Index, increased 8.74%. The fund’s Core Growth and Disruptive Growth companies led the strong performance of the fund in the quarter. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Baron Focused Growth Fund highlighted stocks like On Holding AG (NYSE:ONON) in the second quarter 2023 investor letter. Headquartered in Zurich, Switzerland, On Holding AG (NYSE:ONON) distributes athletic footwear, apparel, and accessories. On September 11, 2023, On Holding AG (NYSE:ONON) stock closed at $29.99 per share. One-month return of On Holding AG (NYSE:ONON) was 0.74%, and its shares gained 57.02% of their value over the last 52 weeks. On Holding AG (NYSE:ONON) has a market capitalization of $9.536 billion.
Baron Focused Growth Fund made the following comment about On Holding AG (NYSE:ONON) in its Q2 2023 investor letter:
“In the second quarter, we purchased shares of On Holding AG (NYSE:ONON), a developer and distributor of athletic footwear, apparel, and accessories. On is one of the fastest-growing scaled athletic sports companies in the world. It specializes in products featuring the company’s proprietary cushioning technology, most notably Cloud Tec (flex plates in shoes), Speed board (injection molding), Mission grip (for trails), Helion (super foam cushioning) and The Roger franchise for tennis (Roger Federer invested $50 million in 2019). The products are sold through 8,100 premium retail stores which account for 60% of revenue, and direct-to-consumer sales account for the balance, with the majority of direct-to-consumer done through its website. On has expanded outside of Switzerland and Europe. It operates one flagship retail store in New York City and four smaller format retail stores in China. Roughly half of its revenues are generated in North America, 44% in Europe, and 5% in Asia Pacific.
On has a large market opportunity operating in the $300 billion global sportswear industry, which is forecast to grow at a high single-digit rate through 2025, making it one of the fastest-growing pockets within consumer. The factors driving growth in the industry include continued trends toward athleisure as consumers pivot towards more comfortable and casual attire combined with trends towards healthier lifestyles. The industry is highly competitive with Nike and Adidas garnering 15% and 11% share, respectively. In footwear, the industry is even more consolidated with Nike and Adidas taking over 50% share in the U.S. and over 40% globally. Regardless, we believe On has an opportunity to continue taking share from Nike and Adidas as has been the case over the past couple of years. This is due to the extraordinary quality of its products. Demand is so strong that On has not been able to meet consumer demand for its shoes.
We believe On should be able to grow revenues 20% to 25% annually for many years, while expanding margins. We expect the company to continue to reinvest in its business at high rates of return. It is debt free. Its growth should be driven by growing brand awareness as On expands its geographic footprint. Eventual upselling of its running sneakers across lifestyle, outdoor, and tennis as well as from footwear to apparel and accessories is another long-term opportunity.”
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On Holding AG (NYSE:ONON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held On Holding AG (NYSE:ONON) at the end of second quarter which was 22 in the previous quarter.
We discussed On Holding AG (NYSE:ONON) in another article and shared the list of most cushioned walking shoes for work. In addition, please check out our hedge fund investor letters Q2 2023 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.
