Baron Asset Fund recently published its first-quarter commentary – a copy of which can be downloaded here. During the first quarter of 2020, the Baron Asset Fund returned -16.63% (institutional shares). In comparison, the benchmark S&P 500 Index was down 19.60%, while the Russell Midcap Growth Index was down 20.04%.
In the said letter, Baron Asset Fund highlighted a few stocks and Guidewire Software Inc. (NYSE:GWRE) is one of them. Guidewire is a software publisher based in California. Year-to-date, GWRE stock lost 15.7% and on May 5th it had a closing price of $91.68. Its market cap is of $7.7 billion. Here is what Baron Asset Fund said:
“Shares of property and casualty insurance software vendor Guidewire Software, Inc. detracted from performance. Guidewire is transforming its business from its historic focus on premise-based software to cloud-based software services. During the quarter, the company reported financial results well ahead of expectations. Demand for its cloud-based services accelerated meaningfully, which we believe is favorable from a long-term perspective. However, this had negative consequences on its income statement in the short term. During the quarter, the company signed two very large customers to cloud deals. We believe one of these deals, with insurer USAA, could be worth $40 million to $50 million of annual recurring revenue once implemented. We believe that Guidewire’s stock should recover, as the market better appreciates the positive long-term financial implications of the company’s rapid transition in its business model.”
In Q4 2019, the number of bullish hedge fund positions on GWRE stock increased by about 33% from the previous quarter (see the chart here).
Disclosure: None. This article is originally published at Insider Monkey.