Baron Funds, an investment management company, released its “Baron Discovery Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Year-to-date, the fund was up 10.75% (Institutional Shares), compared to a 11.65% return for the Russell 2000 Growth Index. The fund was up 2.85% in the third quarter, lagging behind the Index’s 12.19% return. 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 Discovery Fund highlighted stocks such as Netskope, Inc. (NASDAQ:NTSK). Netskope, Inc. (NASDAQ:NTSK) is a cybersecurity company that offers security, networking, and analytics solutions. The three-month return of Netskope, Inc. (NASDAQ:NTSK) was 3.26%. On October 29, 2025, Netskope, Inc. (NASDAQ:NTSK) stock closed at $23.41 per share, with a market capitalization of $8.944 billion.
Baron Discovery Fund stated the following regarding Netskope, Inc. (NASDAQ:NTSK) in its third quarter 2025 investor letter:
“During the quarter, we initiated a position in Netskope, Inc. (NASDAQ:NTSK), a leading cybersecurity company specializing in Secure Access Service Edge (SASE). SASE is a large, fast-growing IT category that converges several historically separate networking and security products, including data loss prevention, secure web gateways, cloud application access, and private network access. Netskope provides a unified SASE platform that inspects and secures all of a company’s data traffic—whether to the web, the cloud, or private applications—allowing it to enforce security policies, prevent data loss, and stop threats in real-time, all while enhancing network speed and performance. The company serves over 4,300 customers, including more than 30% of the Fortune 100.
The rising cybersecurity threat environment, proliferation of cloud and AI applications, and new regulatory requirements have made SASE a critical priority for large enterprises. Gartner expects the $15 billion addressable market today to nearly double by 2028. Netskope has been gaining market share in this space due to its next-generation technology. Unlike many peers who rely on public cloud infrastructure, Netskope spent years and hundreds of millions of dollars to build and operate its own global network of over 120 data centers. This gives the company full control over performance and results in faster connectivity for its users. Critically, Netskope’s founders designed the platform to deeply inspect and understand the “language of the cloud,” allowing for far more granular control over how employees interact with modern applications, including new generative AI tools. This unique architecture has resulted in strong win rates, accelerating revenue growth, and best-in-class customer retention, with a 96% gross retention rate.
We believe Netskope is well positioned for durable growth and significant margin expansion. New customer growth has accelerated, while the company maintains a healthy 117% net revenue retention rate as existing customers expand their usage. With the average customer still using only a fraction of Netskope’s 20-plus products, there is a long runway for continued wallet share capture. Furthermore, with the heavy capital investment in its global network largely complete, the company has begun to generate strong operating leverage. We expect this trend to continue as Netskope scales, driving substantial free cash flow generation and creating long-term shareholder value.”
Netskope, Inc. (NASDAQ:NTSK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of Netskope, Inc. (NASDAQ:NTSK) 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 Netskope, Inc. (NASDAQ:NTSK) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Netskope, Inc. (NASDAQ:NTSK) and shared the list of stocks Jim Cramer discussed recently. 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.
