Baron Funds, an investment management company, released its “Baron Asset Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. US markets continued its strong rally in the first quarter. Robust economic data and relatively strong corporate earnings boosted the rally along with the anticipation of a soft landing of the market. The fund (Institutional Shares) appreciated 6.00% in the quarter compared to 9.50% for the Russell Midcap Growth Index and 10.56% for the S&P 500 Index. Stock selection and headwinds from the Fund’s longtime style biases led the fund to underperform in the first quarter. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Asset Fund featured stocks like Spotify Technology S.A. (NYSE:SPOT) in the first quarter 2024 investor letter. Headquartered in Luxembourg City, Luxembourg, Spotify Technology S.A. (NYSE:SPOT) offers audio streaming subscription services. On May 13, 2024, Spotify Technology S.A. (NYSE:SPOT) stock closed at $289.71 per share. One-month return of Spotify Technology S.A. (NYSE:SPOT) was -2.81%, and its shares gained 98.00% of their value over the last 52 weeks. Spotify Technology S.A. (NYSE:SPOT) has a market capitalization of $57.668 billion.
Baron Asset Fund stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its first quarter 2024 investor letter:
“Another new addition was Spotify Technology S.A. (NYSE:SPOT), a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported free option. Spotify was among the originators of paid streaming music after the downloads/Napster era, with the Spotify app launching broadly in the early 2010s. Since then, streaming music has grown at a 20%-plus CAGR, and Spotify has been the leading streaming music service both in the U.S. and globally, with more than 600 million monthly average users. We believe that Spotify offers a compelling user experience, which includes algorithmic recommendations and podcasts.
While we have monitored Spotify for some time because of its product leadership and large market opportunity, we believe the last few months have signaled a meaningful positive inflection point for the company. First, Spotify has continued to show that its market is far from penetrated – subscriber net adds accelerated in 2023, even as the product has been widely available for years, thanks to targeted marketing in various countries and new product features. Next, Spotify’s gross margin profile continues to improve thanks to the impact of its artist promotions marketplace, growth in its advertising business, and improved profitability in its podcast offerings.
In addition, management has recently become much more focused on operating discipline, with 2024 expected to be Spotify’s first meaningfully profitable year after operating losses in 2021 and 2022. This has entailed material staff layoffs, restructuring the podcast division, and hiring a new operationally focused CFO. Furthermore, Spotify increased its pricing structure while seeing minimal customer loss, demonstrating the pricing power in its product and the broader streaming music industry. Finally, Spotify has continued to innovate its product roadmap, introducing audiobooks and features like AI DJ that differentiate it from other music streaming providers. We believe that Spotify has the potential to reach more than 1 billion monthly active users, as its global market share increases and music listening habits mature internationally, and we expect its profitability to continue to improve.”
Photo by Heidi Fin on Unsplash
Spotify Technology S.A. (NYSE:SPOT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Spotify Technology S.A. (NYSE:SPOT) was held by 68 hedge fund portfolios, compared to 53 in the previous quarter, according to our database. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.
We discussed Spotify Technology S.A. (NYSE:SPOT) in another article and shared the list of music stocks to invest in. Spotify Technology S.A. (NYSE:SPOT) was one of Artisan Mid Cap Fund’s top contributors in Q1 2024.
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Disclosure: None. This article is originally published at Insider Monkey.
