Here’s Why Microsoft (MSFT) Became a Top Contributor in Baron Fund’s Q1 Portfolio

Baron Funds, an asset management firm, published its “Baron Opportunity Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 0.88% was delivered by the fund’s institutional shares for the Q1 of 2021, below both its S&P 500 and Russell 3000 Growth Index that delivered a 6.17% and 1.19% returns respectively for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Baron Opportunity Fund, in their Q1 2021 investor letter, mentioned Microsoft Corporation (NASDAQ: MSFT), and shared their insights on the company. Microsoft Corporation is a Redmond, Washington-based technology company that currently has a $1.89 trillion market capitalization. Since the beginning of the year, MSFT delivered a 13.38% return, while its 12-month gains are up by 41.01%. As of April 30, 2021, the stock closed at $252.18 per share.

Here is what Baron Opportunity Fund has to say about Microsoft Corporation in their Q1 2021 investor letter:

Microsoft Corporation is a cloud-software Titan, and also discussed further in the Review and Outlook section above and the Top Purchases section below. Microsoft was a top contributor in the period because it trades at reasonable FCF and earnings valuations, has cloud and digital transformation tailwinds at its back, and reported an excellent December quarter, beating Street expectations by a wide margin. Microsoft’s results were strong across the board, with accelerating trends in Azure cloud computing and solid growth in its overall commercial cloud businesses. Azure accelerated to 48% constant-currency (“cc”) revenue growth from 47% the quarter before, and commercial cloud grew 32% cc, ahead of Street estimates at 26%. Microsoft’s profitability was also a significant beat, with operating income coming it at $17.9 billion, almost $3 billion ahead of Street estimates. Microsoft’s March quarter guidance also outstripped Street projections, with revenue growth of 16.5% versus the Street at 10.6%, and operating income over $1 billion ahead. CEO Satya Nadella began the earnings call with this proclamation: “What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry. Digital capability is key to both resilience and growth … Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform … I’m energized by our increasing momentum and the expanding opportunity fueled by the structural change brought about by the rapid adoption of digital technology.””

Our calculations show that Microsoft Corporation (NASDAQ: MSFT) ranks 2nd in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Microsoft Corporation was in 258 hedge fund portfolios, compared to 234 funds in the third quarter. MSFT delivered a 5.23% return in the past 3 months.

The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

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Disclosure: None. This article is originally published at Insider Monkey.