Baron Funds, an investment management company, released its “Baron FinTech Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. For the fifth consecutive quarter, U.S. stocks increased, with most of the gains coming in November after the U.S. elections, which saw Republicans secure majorities in both chambers of Congress and President Donald Trump re-elected. In the fourth quarter, the fund rose 5.29% (Institutional Shares) compared to a 4.24% return for the FactSet Global FinTech Index (Benchmark) and a 2.41% gain for the S&P 500 index. Since inception, the fund has appreciated at an annualized rate of 12.17%, compared to 3.93% for the Benchmark. In addition, please check the fund’s top five holdings to know its best picks in 2024.
In its fourth quarter 2024 investor letter, Baron FinTech Fund emphasized stocks such as Robinhood Markets, Inc. (NASDAQ:HOOD). Robinhood Markets, Inc. (NASDAQ:HOOD) is a financial services platform that allows users to invest in stocks, exchange-traded funds (ETFs), American depository receipts, options, gold, and cryptocurrencies. The one-month return of Robinhood Markets, Inc. (NASDAQ:HOOD) was 17.61%, and its shares gained 323.98% of their value over the last 52 weeks. On February 19, 2025, Robinhood Markets, Inc. (NASDAQ:HOOD) stock closed at $59.23 per share with a market capitalization of $52.446 billion.
Baron FinTech Fund stated the following regarding Robinhood Markets, Inc. (NASDAQ:HOOD) in its Q4 2024 investor letter:
“We also initiated a position in Robinhood Markets, Inc. (NASDAQ:HOOD) during the quarter. Robinhood is an online brokerage that offers free trading across stocks, options, and cryptocurrencies. Baron Capital has long invested in successful brokerage companies such as Charles Schwab, Interactive Brokers, and LPL Financial. We first met Robinhood in 2021 during their IPO process. Customers were using Robinhood because of its low-cost offering and simple user interface that makes trading easy and accessible. While we were impressed with management’s success in building a modern brokerage with a large user base and strong product-market fit, we were hesitant to invest at a cyclical peak in trading activity and fintech valuations during the middle of the COVID-era meme-stock craze. Following the IPO, trading activity soon normalized and the share price fell significantly.
After revisiting the company this past year, we believe Robinhood is a much-improved business today. Departing from its early reputation as a gamified enabler of retail speculation in meme stocks, Robinhood has been professionalized and transformed into a more durable company that can reliably gain market share and grow earnings over the long term. Some examples of the company’s maturation include: 1) providing retirement accounts that should create larger and longer-lasting client relationships; 2) launching the Gold subscription service that delivers additional value to Robinhood’s best customers; 3) introducing the web-based Legend platform that offers more advanced features for active traders; and 4) exercising expense discipline to right-size the cost base and deliver profitability alongside growth. These efforts have delivered strong financial results, with Robinhood generating annualized net new asset growth of 29%, custodied asset growth of 76%, and an adjusted EBITDA margin of 42% in the most recent quarter. Average revenue per user has also increased significantly from $60 in 2022 to $107 in the first nine months of 2024 across more than 24 million funded accounts. The customer retention rate is a very strong 95%, up from 80% three years ago…” (Click here to read the full text)
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Robinhood Markets, Inc. (NASDAQ:HOOD) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 79 hedge fund portfolios held Robinhood Markets, Inc. (NASDAQ:HOOD) at the end of the fourth quarter which was 36 in the previous quarter. Robinhood Markets, Inc.’s (NASDAQ:HOOD) revenues more than doubled to $1 billion in the fourth quarter compared to the previous year, fueled by strong performance across all areas of the business. While we acknowledge the potential of Robinhood Markets, Inc. (NASDAQ:HOOD) 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 Robinhood Markets, Inc. (NASDAQ:HOOD) and shared the list of stocks in Cathie Wood’s stock portfolio. In addition, please check out our hedge fund investor letters Q4 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.