Baron Funds, an investment management company, released its “Baron Technology Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. After a slow start to the quarter, U.S. stocks increased steadily in May and June. In the second quarter, the fund rose 7.09% (Institutional Shares) underperforming an 11.38% return for the MSCI ACWI Information Technology Index (the Benchmark) and outperforming the 4.28% gain for the S&P 500 index. For the first half of 2024, the fund delivered solid returns, increasing 22.86% compared to 24.80% and 15.29% returns for the indexes. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Technology Fund highlighted stocks like Workday, Inc. (NASDAQ:WDAY), in the second quarter 2024 investor letter. Workday, Inc. (NASDAQ:WDAY) offers enterprise cloud applications. The one-month return of Workday, Inc. (NASDAQ:WDAY) was 20.68%, and its shares gained 2.06% of their value over the last 52 weeks. On September 5, 2024, Workday, Inc. (NASDAQ:WDAY) stock closed at $255.79 per share with a market capitalization of $67.784 billion.
Baron Technology Fund stated the following regarding Workday, Inc. (NASDAQ:WDAY) in its Q2 2024 investor letter:
“Workday, Inc. (NASDAQ:WDAY) is a leading cloud human capital and financial management software vendor. The stock detracted from performance after it reported an “in-line” subscription revenue quarter, which marked the second quarter in a row of weaker-than-expected bookings growth (quarter-over-quarter change in 12-month current revenue performance obligations + subscription revenues), with bookings decelerating to 13% the fourth quarter of fiscal year 2024 and 12% in the first quarter of fiscal year 2025. Management noted it saw extended deal cycles and customers committing to lower headcount on renewals. In our view, Workday either needs to be able to reaccelerate growth or show greater margin expansion (it is tracking about 500 basis points below its closest peers, which are delivering close to 30% adjusted operating margins vs. about 25% for Workday). Given the current headwinds around IT budgets – namely, the ability for back office digital transformation projects to sustain priority amidst AI projects that tend to focus on the front office – and the company’s tardy margin expansion, we decided to exit the remainder of the position (we had trimmed it after our visit to Workday’s headquarters in the March quarter). We will revisit the name if we gain greater conviction in either faster growth or an updated target model that incorporates more operating leverage.”
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Workday, Inc. (NASDAQ:WDAY) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 86 hedge fund portfolios held Workday, Inc. (NASDAQ:WDAY) at the end of the second quarter which was 83 in the previous quarter. While we acknowledge the potential of Workday, Inc. (NASDAQ:WDAY) 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 Workday, Inc. (NASDAQ:WDAY) and shared the list of best enterprise software stocks to buy. In its Q2 2024 investor letter Polen Global Growth Strategy noted that Workday, Inc. (NASDAQ:WDAY) experienced a sell-off during the quarter, but it remained optimistic about the stock’s long-term growth potential. 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.
