Accelerated Testing Volume Lifted CareDx (CDNA) in Q3

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Baron Funds, an investment management company, released its “Baron Discovery Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund appreciated 13.55% (Institutional Shares), outperforming the 8.41% return for the Russell 2000 Growth Index. Year-to-date, the fund returned 9.50% compared to the index's 13.22% return. The firm was pleased with the fund's performance in the third quarter and believes that the bear market in small-cap growth stocks, which began in February 2021, may finally end. In addition, please check the fund’s top five holdings to know its best picks in 2024.

Baron Discovery Fund highlighted stocks like CareDx, Inc (NASDAQ:CDNA) in the third quarter 2024 investor letter. Incorporated in 1998, CareDx, Inc (NASDAQ:CDNA) is involved in discovering, developing, and commercializing diagnostic solutions for transplant patients and their caregivers.  The one-month return of CareDx, Inc (NASDAQ:CDNA) was -23.98%, and its shares gained 221.91% of their value over the last 52 weeks. On November 6, 2024, CareDx, Inc (NASDAQ:CDNA) stock closed at $23.21 per share with a market capitalization of $1.245 billion.

Baron Discovery Fund stated the following regarding CareDx, Inc (NASDAQ:CDNA) in its Q3 2024 investor letter:

"CareDx, Inc (NASDAQ:CDNA) is a diagnostic company that facilitates donor matches pre-transplant and rejection monitoring post-transplant. In August 2024, CMS “retired” a draft local coverage determination that had previously caused a major reimbursement overhang, massively impacting CareDx’s revenues and share price. Shares outperformed for the quarter as testing volumes accelerated, leading the company to beat second quarter consensus estimates as well as its full-year guidance. The silver lining from the difficult period CareDx experienced is that it has optimized its operating expense structure and should see meaningfully increased profitability as it gets back to prior testing volumes and beyond. Even after a big rebound in the shares this year, we still believe CareDx’s valuation remains inexpensive."

A healthcare professional in front of a console, monitoring the progress of a transplant patient.

CareDx, Inc (NASDAQ:CDNA) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held CareDx, Inc (NASDAQ:CDNA) at the end of the second quarter which was 15 in the previous quarter. CareDx, Inc (NASDAQ:CDNA) reported revenue of $82.9 million in the third quarter, representing 23% year-over-year growth. While we acknowledge the potential of CareDx, Inc (NASDAQ:CDNA) 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.

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