What Makes Samsara (IOT) a Potential Investment?
Baron Funds, an investment management company, released its “Baron Opportunity Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund rose 4.35% (Institutional Shares), lagged the Russell 3000 Growth Index, which gained 7.80%, and essentially matched the S&P 500 Index, which advanced 4.28%. In the first half of 2024, the fund posted solid gains, rising 20.44% compared to a 19.90% return for the Russell 3000 Growth Index and beating the S&P 500 Index’s 15.29% gain. After a slow start to the quarter, U.S. stocks increased steadily in May and June. Increased worries about inflation, the pace of expected rate cuts by the Federal Reserve, and growing geopolitical tensions in the Middle East were blamed for the early market weakness. In addition, you can check the fund's top 5 holdings to determine its best picks for 2024.
Baron Opportunity Fund highlighted stocks like Samsara Inc. (NYSE:IOT) in the second quarter 2024 investor letter. Samsara Inc. (NYSE:IOT) offers solutions to connect physical operations data to its connected operations cloud. The one-month return of Samsara Inc. (NYSE:IOT) was 7.55%, and its shares gained 70.16% of their value over the last three months. On August 20, 2024, Samsara Inc. (NYSE:IOT) stock closed at $40.72 per share with a market capitalization of $22.429 billion.
Baron Opportunity Fund stated the following regarding Samsara Inc. (NYSE:IOT) in its Q2 2024 investor letter:
"We initiated a position inSamsara Inc. (NYSE:IOT) during the quarter. Samsara provides a cloud software platform for commercial vehicle telematics, video-based driver safety, driver workflow automation, and industrial equipment monitoring. Its software collects and analyzes data from sensors and cameras installed in its customers’ commercial trucks, construction equipment, warehouses, and other assets, helping companies visualize and improve the state of their operations. More than 17,500 customers in the transportation, field services, construction, utilities, and other industries have adopted Samsara, and last year the company became one of the fastest software companies ever to reach $1 billion in annual recurring revenue (ARR). Samsara has been winning share from competitors in the $51 billion connected fleet software market due to its superior cloud native architecture, ability to address multiple use cases in a single platform, and its rapid product release cycle. As Samsara continues to expand its connected asset base, it is building an unmatched data asset that it is using to drive better outcomes for its customers. Capturing more than 9 trillion data points from over 44 billion hours of camera footage across millions of miles driven, Samsara uses AI to help companies optimize their vehicle routes, prevent accidents, improve asset utilization, reduce fuel expenses, and lower insurance premiums. In 2023, across its customer base, the company prevented 200,000 accidents and reduced carbon emissions by 2.3 billion pounds. We see a long runway for growth as Samsara expands in existing accounts and wins new logos. Samsara is less than 50% penetrated in its existing customers’ vehicle fleets and has a significant opportunity to cross-sell newer non-vehicle products (which already account for $125 million of ARR) into its base. The company has also increased its customer count by more than 20% year-over-year every quarter and identified hundreds of thousands of potential new accounts to win. As it has scaled, Samsara has delivered healthy operating leverage, and we think free cash flow margins can ultimately expand beyond 20% longer term."
A data analyst wearing virtual reality goggles while analyzing on-board telematics.
Samsara Inc. (NYSE:IOT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held Samsara Inc. (NYSE:IOT) at the end of the second quarter which was 22 in the previous quarter. Samsara Inc.'s (NYSE:IOT) ARR at the end of first quarter was $1.18 billion, up 37% year over year. While we acknowledge the potential of Samsara Inc. (NYSE:IOT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Samsara Inc. (NYSE:IOT) and shared the list of cheap robotics stocks to buy. In addition, please check out our hedge fund investor letters Q2 2024 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.