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 Procore Technologies, Inc. (NYSE:PCOR) in the first quarter 2024 investor letter. Based in Carpinteria, California, Procore Technologies, Inc. (NYSE:PCOR) provides a cloud-based construction management platform. On May 13, 2024, Procore Technologies, Inc. (NYSE:PCOR) stock closed at $67.81 per share. One-month return of Procore Technologies, Inc. (NYSE:PCOR) was -7.10%, and its shares gained 24.19% of their value over the last 52 weeks. Procore Technologies, Inc. (NYSE:PCOR) has a market capitalization of $9.922 billion.
Baron Asset Fund stated the following regarding Procore Technologies, Inc. (NYSE:PCOR) in its first quarter 2024 investor letter:
“We initiated an investment in Procore Technologies, Inc. (NYSE:PCOR). Founded in 2002, Procore provides cloud-based construction management software that helps general contractors, subcontractors, and asset owners manage every step of the construction process. Procore’s product suite includes project execution (storing and updating blueprints, designs, work orders, and project schedules in a single system of record), pre-construction (managing bids, permitting, and approvals), workforce management (scheduling worker hours and recording safety compliance), financial management (budgeting and invoicing), and data analytics. Together these products help contractors execute projects more efficiently, plan more accurately, avoid costly rework, improve worker safety, and generate better margins. This has led to very low customer churn.
Procore serves a large and growing addressable market – annual construction volume exceeds $2 trillion in the U.S. alone – that is still in the early stages of digitization and technology adoption. The company has leading market share in the sector, with more than 16,000 construction firms and asset owners using its software to manage billions of dollars of annual project volume. Yet, Procore has penetrated just 12% of U.S. construction volume and 2% of international volume. We believe the company has several competitive advantages that will drive further share gains and revenue growth. First, Procore is the only cloud-native technology vendor that addresses all stages of the project life cycle with a single, integrated interface and data model. Second, Procore was the first vendor to price its platform using a take-rate model, charging a percentage fee against its customers’ total construction volume. Compared to seat-based license models offered by many competitors, this approach has encouraged far more industry practitioners to trial and use Procore products. As of last year, more than 500,000 collaborator companies were interacting with its product, driving a strong pipeline for new customer wins.
We see a long runway for growth through new customer additions and expanded usage within existing accounts. Recent product innovations like Procore Pay (managing payments for the various vendors and subcontractors on a given project) and geospatial mapping (for larger civil engineering projects) should improve the company’s prospects. Procore is cash flow positive today and has been increasing its margins meaningfully during the past two years. We think the business can continue to grow at a healthy rate while further expanding free-cash-flow margins in excess of 20%, as it benefits from greater market share, higher take rates, and operating leverage. We believe this should result in good earnings growth and bodes well for the stock long term.”
A computer monitor displaying cloud-based construction management platform software.
Procore Technologies, Inc. (NYSE:PCOR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Procore Technologies, Inc. (NYSE:PCOR) was held by 50 hedge fund portfolios, compared to 43 in the previous quarter, according to our database.
Artisan Small Cap Fund added Procore Technologies, Inc. (NYSE:PCOR) to its portfolio in the fourth quarter 2023 due to its potential for long-term growth. In addition, please check out our hedge fund investor letters Q1 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.
