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.

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.
As the market leader in internet casino gaming, DraftKings is 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.

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 spaces, including small jet engine, microwave electronics, and missile defense businesses. We expect growth to accelerate as Kratos wins key government contracts across the business due to its unique, low-cost offerings.

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 leader in transplant diagnostics, with presence in nearly all U.S. and EU centers. Its current growth is driven by AlloSure, a test for kidney transplants, which represents a $2 billion market. Overall, CareDx addresses a $7 billion market and has the potential to reach $12 billion with new products.

Guidewire Software, Inc. (GWRE) is a leading provider of core systems software to the global P&C insurance industry.
Guidewire is a small player in a vast addressable market and has been benefiting from the inevitable need for P&C insurers to upgrade 30-year-old systems. The company offers best-in-class functionality, as evidenced by its growing installed base and near-100% retention rates. The company has passed the midpoint of its cloud transition, and we expect to see accelerating revenue, expanding margins, and improving FCF over the next several years. We believe that recent M&A in the vertical software space supports a meaningful value creation opportunity for shareholders.

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 transformed into a more diversified industrial technology company with a long runway for earnings growth, versus its prior position 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. Its cloud-based multi-tenant platform should continue to take share from legacy on-premise, service-heavy solutions or homegrown systems as companies increasingly shift operations to the cloud. 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.

SiteOne Landscape Supply, Inc. (SITE) is the largest wholesale distributor of landscape supplies in North America. Through its large branch network, the company offers a broad selection of products across irrigation, agronomics, hardscapes, and nursery to landscaping professionals.
While SiteOne is more than five times the size of its closest competitor, it has only mid-teens share of a highly fragmented market. It has significant opportunity to further consolidate the industry through accretive acquisitions, driven by an experienced management team with a strong M&A track record. The core landscaping market generally grows faster than GDP over time and is relatively recession resilient. SiteOne is also investing in initiatives to increase the productivity of its sales force and in-store associates to expand margins over time.

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