Baron Discovery Fund

Axon Enterprise, Inc. (AXON) is a public safety company with three major product lines: high-definition body and vehicle cameras (sensor division), subscription-based digital evidence services and storage, and non-lethal taser devices.
With $1.6 billion in sales in 2023, Axon has less than 3% share of its $63 billion addressable market. Building off its dominant position in tasers, Axon is seeking to grow its software business from approximately 38% of revenue today to close to 50% by 2028, which, in turn, should enhance margins. We think Axon can increase EBITDA margins to over 25%, with sustained revenue growth greater than 20%. Axon is a winner-take-most company in its markets given its reputation, scale, and integration of evidentiary products with sensors and tasers.

CyberArk Software Ltd. (CYBR) is an identity-based security software provider focused on privileged access management (PAM). The PAM platform prevents against theft of the credentials of privileged accounts (such as IT administrators) and restricts access to critical resources.
CyberArk is a recognized market leader with more than 25% share in PAM and deployments in over half of the Fortune 500. The company is leveraging its foothold in PAM across its 8,000 clients to expand into adjacent markets such as single sign-on, multifactor authentication, secrets management, and endpoint privilege management. New product categories, which are doubling on a yearly basis, account for roughly 40% of revenue. Transition to a subscription-based model should lead to revenue reacceleration, strong free cash flow margins, and increased customer lifetime value. 

Kratos Defense & Security Solutions, Inc. (KTOS) develops and fields transformative, affordable technology, platforms, and systems for U.S. national security-related customers, allies, and commercial enterprises.
Kratos specializes in unmanned systems, satellite communications, cybersecurity/warfare, missile defense, training, and combat systems. Kratos’ unmanned systems/drone business offers technologically disruptive solutions that enable cost-effective upgrades of U.S. military technology. Within government services, the majority of revenue comes from high growth space, small jet engine, and missile defense businesses. We expect growth to accelerate as Kratos' unmanned solutions win key government contracts, supported by growth across the government services segment.

CareDx, Inc. (CDNA) is a diagnostic company that uses next generation sequencing to accurately map the complex characteristics of transplant patients to ensure proper organ matches pre-transplant and to monitor for rejection and optimize proper post-transplant immunosuppression drug regimens.
CareDx is the market leader in transplant diagnostics, with presence in nearly all U.S. and EU centers. Its current growth is driven by a kidney transplant test called AlloSure, which launched in 2018 and addresses a $2 billion market. Overall, CareDx addresses a $7 billion market and has the potential to reach $12 billion with new products. We believe that sales can grow from an estimated $260 million in 2021 to nearly $600 million in 2025 as penetration increases.

DraftKings Inc. (DKNG) is the leading mobile sportsbook and gaming operator in the U.S. Its products include daily fantasy sports, regulated internet casino gaming, and regulated online sports betting. DraftKings offers sports betting in 26 states and online casino gaming in five states.
DraftKings is the market share leader in internet casino gaming and remains well positioned to capitalize on the rapid growth of regulated sports betting and iGaming in the U.S. The company is demonstrating healthy profit margins in its most mature markets and remains focused on driving strong customer lifetime value. We believe DraftKings’s product and scale advantages will enable the company to maintain its leadership position in the years ahead.

Advanced Energy Industries, Inc. (AEIS) is a pure-play power conversion company that makes equipment to transform, refine, and modify electrical power from a utility into controllable, usable power for semiconductor, industrial/medical, data center, and telecom infrastructure applications.
Advanced Energy is a leader in power control in each of its end markets, as many of its products are used in applications where switching suppliers is costly. Through M&A, Advanced Energy has become a more diversified industrial technology company with a long runway for earnings growth from its prior positioning as a high-margin but cyclical semi-cap equipment sub-supplier. The company generates significant cash flow, and we believe it will continue to pursue accretive bolt-on acquisitions, focusing on high-growth and high-margin industrial and medical markets.

PAR Technology Corporation (PAR) is a leading global provider of software, systems, and service solutions to the restaurant industry. Its cloud-based SaaS offering for point of sale, loyalty, ordering, and back office is purpose-built for enterprise restaurants.
PAR is building a cloud-based unified commerce platform for enterprise restaurants to improve operational efficiencies and customer satisfaction. Through acquisitions, PAR now has most of the key pieces of the restaurant tech stack in-house and is driving cross-sell and penetration across enterprise restaurants. The company has a multi-year opportunity to drive the secular shift among restaurant operators to cloud-based systems, with limited competition from incumbents. We think PAR can deliver 20% to 30% ARR growth for several years with strong operating leverage.

Clearwater Analytics Holdings, Inc. (CWAN) is a cloud-based software solution providing portfolio accounting/reporting, compliance monitoring, performance tracking, and risk analytics for insurers, investment managers, corporations, and other institutional investors.
We believe Clearwater has a large market opportunity with the possibility of compounding revenue at a high-teens to 20%-plus rate for several years. The company's competitive advantage comes from its cloud-based multi-tenant platform competing almost entirely against legacy on-premise, service-heavy solutions or homegrown systems. Clearwater also benefits from powerful network effects driven by its unique data model and high client satisfaction. Its efficient business model should help the company reach a 40%-plus adjusted EBITDA margin over time.

SentinelOne, Inc. (S) is a cybersecurity platform focused on agent-based endpoint protection (securing laptops, mobile devices, and virtual machines), cloud security (protecting containerized workloads at runtime), and security analytics. 
SentinelOne was built with AI from inception to facilitate the protection of enterprises across endpoints, identities, and clouds and quickly detect anomalies and potential hacks. We believe it has a long runway for growth driven by 1) market share capture from legacy endpoint vendors struggling to compete against SentinelOne's AI-enabled platform, 2) an ongoing IT infrastructure shift to the cloud driving demand for cloud application protection, and 3) cybersecurity vendor consolidation favoring platforms with comprehensive security portfolios over point solutions.

Kinsale Capital Group, Inc. (KNSL) is a property and casualty insurer focused exclusively on the excess and surplus (E&S) lines market, which includes risks that are unique or difficult to place in the standard insurance market.
We believe Kinsale is a well-run insurer that should grow earnings and book value per share much faster than its peers. Its focus on the attractive E&S market, underwriting discipline, and efficient technology platform enable Kinsale to rapidly grow premiums while delivering industry-leading underwriting margins. Management is highly regarded and has decades of experience in the E&S market. We believe Kinsale has a long runway for growth in an attractive segment of the P&C insurance market.

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