Baron Funds, an investment management company, released its “Baron Discovery Fund” first quarter 2024 investor letter. A copy of the same can be downloaded here. In the first quarter, the fund (Institutional Shares) returned 4.57% underperforming the 7.58% return for the Russell 2000 Growth Index. The firm is optimistic about the Fund’s prospects for 2024. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Baron Discovery Fund featured stocks like CareDx, Inc (NASDAQ:CDNA) in the first quarter 2024 investor letter. Incorporated in 1998, CareDx, Inc (NASDAQ:CDNA) engages in the discovery, development, and commercialization of diagnostic solutions for transplant patients and caregivers. On May 14, 2024, CareDx, Inc (NASDAQ:CDNA) stock closed at $15.24 per share. One-month return of CareDx, Inc (NASDAQ:CDNA) was 84.06%, and its shares gained 96.14% of their value over the last 52 weeks. CareDx, Inc (NASDAQ:CDNA) has a market capitalization of $793.757 million.
Baron Discovery Fund stated the following regarding CareDx, Inc (NASDAQ:CDNA) in its first quarter 2024 investor letter:
“CareDx, Inc (NASDAQ:CDNA) is a diagnostic company that facilitates organ donor matches pre-transplant and rejection monitoring post-transplant. Transplant rejection testing is recurring and can help ensure the right immunosuppressant treatment to avoid overdosage or organ loss. We re-established an investment in the company after selling the position in the first quarter of 2023. At the time, we noted that the reason for sale was “a very unexpectedly negative notice out of MolDx (which is the CMS-related entity that determines pricing and reimbursement criteria for diagnostic tests) exceeded our worst downside scenarios. The vagueness of the notice from MolDx, combined with the potential for a far reduced paid volume of approved tests for Medicare patients put a dramatic amount of current revenue and profitability at risk. We determined that until the issue is resolved, we could not properly underwrite our investment in the company.” As things currently stand, the company has lapped the massive negative revenue effect of the CMS notice and has started growing revenues again under the lower reimbursement regime. Combined with improvement in cash collections and meaningful efficiency improvements in operating expenses, we believe the company will be cash flow breakeven by 2025 and then will be completely self-funding given $235 million of cash and no debt on its balance sheet. The company trades at only 1.3 times its enterprise value to sales ratio, which should be at least double that level. We believe there is a reasonable chance that the CMS guidelines are reversed or at least improved from current levels. This would be a blue sky scenario, where we could see multiple doubles of valuation in a short period of time.”
A healthcare professional in front of a console, monitoring the progress of a transplant patient.
CareDx, Inc (NASDAQ:CDNA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held CareDx, Inc (NASDAQ:CDNA) at the end of the fourth quarter which was 20 in the previous quarter.
Baron Discovery Fund sold CareDx, Inc (NASDAQ:CDNA) in the first quarter 2023 after a tough deliberation. 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.
