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 Casella Waste Systems, Inc. (NASDAQ:CWST) as a new addition. Casella Waste Systems, Inc. (NASDAQ:CWST) is a leading waste management and recycling company. On February 2, 2026, Casella Waste Systems, Inc. (NASDAQ:CWST) stock closed at $102.39 per share. Casella Waste Systems, Inc. (NASDAQ:CWST) delivered a 0.88% return in the past month, and its shares are down 4.99% over the past twelve months. Casella Waste Systems, Inc. (NASDAQ:CWST) has a market capitalization of $6.501 billion.
Baron Discovery Fund stated the following regarding Casella Waste Systems, Inc. (NASDAQ:CWST) in its fourth quarter 2025 investor letter:
“We recently initiated a position in Casella Waste Systems, Inc. (NASDAQ:CWST), the fifth largest waste management and recycling company in North America. Founded in Vermont in 1975 by John and Doug Casella, the company has been through multiple iterations owning a variety of businesses, but over the last decade has transformed itself into one of the fastest growing waste companies in the New England and Mid-Atlantic regions. The company has strong pricing power with 70% of the business focused on less competitive rural markets and 15% of revenue tied to high margin disposal/landfill revenue. This strong pricing power has resulted in mid-to-high single-digit organic top-line growth and mid-teens free cash flow growth. The team has augmented its organic revenue growth with over 80 acquisitions in the last 7 years, finding high quality bolt-on type deals where Casella is able to substantially increase margins over time. We would expect this pace of M&A to continue for the foreseeable future.
We purchased Casella’s stock after the company meaningfully underperformed peers in 2025 due to issues integrating a newly acquired Mid-Atlantic acquisition. These integration challenges caused the company’s margins to come in lower than expected. We believe the company has largely rectified the issues and it is back on track to expand its margins in 2026. If we are correct, we would expect investors to reward the stock with a higher valuation multiple that is more in line with its historical average…” (Click here to read the full text)
Casella Waste Systems, Inc. (NASDAQ:CWST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 26 hedge fund portfolios held Casella Waste Systems, Inc. (NASDAQ:CWST) at the end of the third quarter, up from 24 in the previous quarter. In the third quarter of 2025, Casella Waste Systems, Inc. (NASDAQ:CWST) reported revenues of $485.4 million, up $73.7 million or 17.9% year-over-year. While we acknowledge the risk and potential of Casella Waste Systems, Inc. (NASDAQ:CWST) 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 Casella Waste Systems, Inc. (NASDAQ:CWST) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Casella Waste Systems, Inc. (NASDAQ:CWST) and shared TimesSquare Capital U.S. Small Cap Growth Strategy’s views on the company last quarter. 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.
