Should You Invest in Loar Holdings (LOAR)?

Baron Funds, an investment management company, released its “Baron Asset Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. US equities continued the previous quarter’s rally in the third quarter of 2025. The expectation of the Federal Reserve (the Fed) to cut interest rates was the primary driver behind the market rally. In the third quarter, the fund declined 4.23% (Institutional Shares) compared to 2.78% for the Russell Midcap Growth Index and an 8.18% return for the Russell 3000 Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Baron Asset Fund highlighted stocks such as Loar Holdings Inc. (NYSE:LOAR). Incorporated in 2017, Loar Holdings Inc. (NYSE:LOAR) designs, manufactures, and markets aerospace and defense components for aircraft and aerospace and defense systems. The one-month return of Loar Holdings Inc. (NYSE:LOAR) was -6.58%, and its shares lost 16.53% of their value over the last 52 weeks. On November 7, 2025, Loar Holdings Inc. (NYSE:LOAR) stock closed at $74.55 per share, with a market capitalization of $6.98 billion.

Baron Asset Fund stated the following regarding Loar Holdings Inc. (NYSE:LOAR) in its third quarter 2025 investor letter:

“We recently initiated a position in Loar Holdings Inc. (NYSE:LOAR), a niche manufacturer of aerospace parts. Loar boasts an 85% proprietary product portfolio, with over 50% of its revenues derived from aftermarket replacement sales. We believe this is perhaps the best market in the aerospace and defense industry, as evidenced by the experience of TransDigm, a similar company that has been a successful long-term investment for Baron Capital.

We believe this market is especially attractive for several reasons. First, the aerospace industry is growing, with passenger miles increasing at a multiple of global GDP, or approximately 4% annually. Second, Loar benefits from strong pricing power due to the critical nature of its components, the absence of substitute products (owing to high proprietary content), and high barriers to entry. These components are both high risk and relatively low cost for airlines, which are reluctant to compromise safety for minimal cost savings. Most Loar parts cost less than $1,000. In addition, these parts require lengthy and costly approval by the Federal Aviation Administration. Given the high-variability, low-volume nature of aircraft components (millions of parts per aircraft, each with low production volumes), it is difficult for competitors to produce these parts…” (Click here to read the full text)

In another article, we covered Loar Holdings Inc. (NYSE:LOAR) and shared the list of defense stocks that will skyrocket. In addition, please check out our hedge fund investor letters Q3 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.