Baron Funds, an investment management firm, released its “Focused Growth Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund decreased 0.21% (Institutional Shares) in the second quarter outperforming the Russell 2500 Growth Index’s (the Benchmark) 4.22% decline. It became clear throughout the quarter that the Federal Reserve’s (the Fed) restrictive actions over the previous year were starting to reduce employment, job growth, and inflation. The deceleration of economic growth gave investors hope that the Federal Reserve would begin reducing interest rates as early as this fall. Please spare some time to check the fund’s top 5 holdings to know more about their top bets for 2024.
Baron Focused Growth Fund highlighted stocks like Spotify Technology S.A. (NYSE:SPOT) in the second quarter 2024 investor letter. Headquartered in Luxembourg City, Luxembourg, Spotify Technology S.A. (NYSE:SPOT) offers audio streaming subscription services. The one-month return of Spotify Technology S.A. (NYSE:SPOT) was 1.63%, and its shares gained 104.77% of their value over the last 52 weeks. On September 3, 2024, Spotify Technology S.A. (NYSE:SPOT) stock closed at $328.60 per share with a market capitalization of $65.986 billion.
Baron Focused Growth Fund stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its Q2 2024 investor letter:
“Spotify Technology S.A. (NYSE:SPOT) is a leading global digital music service, offering on-demand audio streaming through paid premium subscriptions and an ad-supported model. Shares of Spotify were up, largely attributable to impressive beats in gross margin and operating margin as well as the announcement of subscription price hikes. Given the strong value proposition of the product, Spotify is beginning to exercise its pricing power following last year’s initial price increases that saw minimal churn. Users continue to grow at a healthy pace despite the pricing impact. Spotify also continues to innovate on the product side, with early trials of generative AI features and the addition of new verticals like audiobooks, which have seen solid early adoption. On the cost side, Spotify is on a path to structurally increase gross margins, aided by its high-margin artist promotions marketplace, increasing contribution by its podcast division, and growth of the margin-accretive advertising business. We still view Spotify as a long[1]term winner in music streaming with potential to reach more than one billion monthly active users.”
A person wearing headphones listening to an audio streaming service.
Spotify Technology S.A. (NYSE:SPOT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 88 hedge fund portfolios held Spotify Technology S.A. (NYSE:SPOT) at the end of the second quarter which was 77 in the previous quarter. Spotify Technology S.A.’s (NYSE:SPOT) total revenue for the second quarter increased by 21% year over year on a constant currency basis to €3.8 billion. While we acknowledge the potential of Spotify Technology S.A. (NYSE:SPOT) 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 Spotify Technology S.A. (NYSE:SPOT) and shared Morgan Stanley’s highest conviction stocks and the top stocks to buy. Baron Funds established a position in Spotify Technology S.A. (NYSE:SPOT) during Q1 2024. 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.
