Baron Funds, an investment management company, released its “Baron Discovery Fund” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fund focuses on long-term, competitively positioned companies that are well-managed and have significant potential in untapped markets. The letter also addressed the advancements in AI and how humans define themselves in the changing landscape. In Q4, the fund generated a return of 0.19% (Institutional Shares), underperforming the Russell 2000 Growth Index by 1.03 percentage points. Over the entire year, the fund posted a return of 10.96%, while the Index returned 13.01%. The outperformance of low-quality and short-term price momentum-oriented stocks affected the Fund’s focus on long-term valuation metrics. The top 10 holdings comprised 26.7% of the Fund’s net assets, with cash making up 3.3%. The Fund maintains strong optimism and expects a high-growth, low-inflation environment in 2026. Please review the Fund’s top five holdings to gain insights into their key selections for 2025.
In its fourth-quarter 2025 investor letter, Baron Discovery Fund highlighted stocks like Waystar Holding Corp. (NASDAQ:WAY). Waystar Holding Corp. (NASDAQ:WAY) is a technology company that provides software solutions for healthcare payments. On February 3, 2026, Waystar Holding Corp. (NASDAQ:WAY) stock closed at $24.50 per share. Waystar Holding Corp. (NASDAQ:WAY) delivered a -27.26% return in the past month, and its shares are down 41.61% over the past twelve months. Waystar Holding Corp. (NASDAQ:WAY) has a market capitalization of $4.687 billion.
Baron Discovery Fund stated the following regarding Waystar Holding Corp. (NASDAQ:WAY) in its fourth quarter 2025 investor letter:
“We initiated a position in Waystar Holding Corp. (NASDAQ:WAY), which provides a full spectrum of revenue cycle management software to health care providers. The company services 30,000 clients, representing over 1 million distinct providers. And it processes 6 billion transactions per year, including over $1.8 trillion in annual gross claims which span about 50% of all U.S. patients. Waystar’s $1 billion-plus in estimated 2025 revenues are a 50/50 combination of subscription and volume-based revenue (we believe volume is a true secular grower as health care claims are constantly increasing).
The software smooths the claims process in three distinct areas: (1) Intake (insurance eligibility checks, cost estimation, prior authorization approval and co-pay collection); (2) Clinical Visitation (documentation integrity, showing medical necessity, accuracy of documentation and coding); and (3) Post Care (clean claim submission, claim monitoring, patient payments, denial/appeal, and payor remittance). Waystar acquired its Clinical Visitation capabilities with the July 2025 acquisition of Iodine Software for $1.25 billion, completing what we believe is the industry’s only end-to-end claims automation solution. Historically, this has been a manually intensive process, but it has been highly automated by Waystar, with the help of AI. There are many examples of the value of Waystar’s software. Iodine can use AI to take a physician’s written or typed notes, scan them, and compare them to insurer databases for medical justification, accuracy and completeness, thereby reducing denied claims. Waystar’s software can do similar things with denied claims, using AI to automate the appeals process. It is believed that 80% of the market is still managed by more manually automated business process outsourcing firms. So, there should be a lot of market share yet to convert, in an ever-growing market…” (Click here to read the full text)
Waystar Holding Corp. (NASDAQ:WAY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 47 hedge fund portfolios held Waystar Holding Corp. (NASDAQ:WAY) at the end of the third quarter, compared to 48 in the previous quarter. While we acknowledge the risk and potential of Waystar Holding Corp. (NASDAQ:WAY) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Waystar Holding Corp. (NASDAQ:WAY) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Waystar Holding Corp. (NASDAQ:WAY) and shared the list of best US stocks to buy under $50. In addition, please check out our hedge fund investor letters Q4 2025 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.
