Baron Funds, an investment management company, released its “Baron Opportunity Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund rose 4.04% (Institutional Shares), outperformed the Russell 3000 Growth Index, which gained 3.42%, and lagged the S&P 500 Index, which advanced 5.89%. In the first nine months ended 2024, the fund posted solid gains, rising 25.31% compared to a 24.00% return for the Russell 3000 Growth Index and beating the S&P 500 Index’s 22.08% gain. Due to a significant rotation away from large-cap Magnificent Seven stocks and toward value/cyclical and small-cap stocks, as well as generally positive economic data that supported the soft-landing narrative and the Federal Reserve’s long-awaited dovish pivot, U.S. stocks ended the quarter higher for the fourth consecutive quarter. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Baron Opportunity Fund highlighted stocks like Microsoft Corporation (NASDAQ:MSFT), in the third quarter 2024 investor letter. Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions. The one-month return of Microsoft Corporation (NASDAQ:MSFT) was -0.77%, and its shares gained 28.78% of their value over the last 52 weeks. On October 24, 2024, Microsoft Corporation (NASDAQ:MSFT) stock closed at $424.73 per share with a market capitalization of $3.157 trillion.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT) is in second position on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 279 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the second quarter which was 293 in the previous quarter. In the quarter, Microsoft Corporation’s (NASDAQ:MSFT) revenue was $64.7 billion, up 15% in reported currency and 16% in constant currency and earnings per share was $2.95, representing a 10% increase in reported currency and an 11% increase in constant currency. While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) 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 Microsoft Corporation (NASDAQ:MSFT) and shared Wedgewood Partners’ views on the company. In the previous quarter, Microsoft Corporation (NASDAQ:MSFT) contributed to the performance of Baron Opportunity Fund due to continued strong operating results and investor enthusiasm. In addition, please check out our hedge fund investor letters Q3 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.
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