Baron Asset Fund: Latest Insights and Commentary

The Review and Outlook for period ending June 30, 2025, is not yet available.

CONTRIBUTORS

• Shares of veterinary diagnostics leader IDEXX Laboratories, Inc. contributed to performance for the quarter after reporting better-than-expected financial results. Foot traffic to veterinary clinics in the U.S. remains under pressure, which has continued to hamper aggregate revenue growth. Despite macroeconomic challenges, IDEXX’s excellent execution has enabled the company to maintain strong performance. We believe competitive trends are outstanding, and we expect new proprietary innovations and field sales force expansion to be meaningful contributors to growth in 2025. We see increasing evidence that long-term secular trends around pet ownership and pet care spending have structurally accelerated, which should help support IDEXX’s long-term growth rate.
• Amphenol Corporation, a leading global supplier of advanced interconnect systems, contributed to performance during the quarter. The company reported robust results in April, with organic growth exceeding prior guidance due to strength in the data center end market. Shares continued to perform well as investors became more optimistic about increased capital spending in data infrastructure. We view Amphenol as a best-in-class industrial technology company with a strong track record of creating value through both organic and inorganic growth over time.
• Shares of property and casualty (P&C) insurance software vendor Guidewire Software, Inc. contributed to performance on strong fiscal Q3 2025 financial results and an upward revision to full-year guidance. After a multi-year transition, we think Guidewire’s cloud migration is largely complete. We believe cloud will be the sole path forward, with annual recurring revenue (ARR) benefiting from new customer wins and migrations of the existing customer base to InsuranceSuite Cloud. We also expect the company to shift R&D resources from infrastructure investment to product development, which should help drive cross-sales into its sticky installed base and potentially accelerate ARR growth over time. We are further encouraged by Guidewire’s subscription-based gross margin expansion, which improved by more than 600 basis points in the most recently reported quarter. We believe Guidewire will be the critical software vendor for the global P&C insurance industry, capturing 30% to 50% of its $15 billion to $30 billion total addressable market and generating margins above 40%.

 

DETRACTORS

• Specialty insurer Arch Capital Group Ltd. gave back some of its gains from earlier in the year, following slower growth and broader weakness across insurance stocks during the second quarter. In the first quarter, premium growth came in below forecasts and slowed relative to the prior quarter due to rising competition and lower pricing in certain business lines. Even so, earnings beat expectations due to stronger underwriting margins and lower tax rates. We continue to own the stock due to Arch’s strong management team and our expectation of significant growth in earnings and book value over time.
• The Cooper Companies, Inc. is a global medical device company with two business units: CooperVision, a leading manufacturer of soft contact lenses; and CooperSurgical, which focuses on women's health care and fertility. The stock detracted from performance following mixed fiscal Q2 results. While Cooper reported an earnings-per-share beat—supported by 7% organic growth at CooperVision versus the Street’s 5.5% estimate—the results were overshadowed by management’s acknowledgment of softening contact lens end markets due to macroeconomic headwinds and tighter channel inventories across the industry. Still, CooperCompanies maintained that it is positioned to outpace the market by approximately 150 basis points in fiscal 2025, driven by robust contact lens demand and stable pricing. Management cited ongoing margin expansion as another bright spot and projected continued strength throughout the year due to efficiency gains and favorable product mix. The global contact lens market benefits from long-term secular trends, including sustained demand for premium lenses, and CooperCompanies, which offers the industry’s broadest portfolio of specialty lenses, continues to gain share.
• Bio-Techne Corporation is a leading developer and manufacturer of reagents, instruments, and services for the life sciences research, diagnostics, and bioprocessing markets. The stock fell due to weakness in academic research spending following cuts to National Institutes of Health (NIH) funding. The U.S. academic research market accounts for roughly 12% of Bio-Techne’s revenue, with about half of that tied to NIH grants. Broader biotechnology funding has also been soft amid policy uncertainty and weak capital markets. As a result, management guided to low single-digit organic revenue growth for the June quarter, down from its prior expectation of high single-digit growth. While the challenging environment for U.S. academic research is likely to persist for the foreseeable future, we retain conviction in the stock. Bio-Techne’s overall exposure to this end market remains limited, and we believe the current valuation is attractive.