Baron Generational Growth Fund on Morningstar, Inc.
Thesis
Morningstar is included among the Fund's information-service holdings that have experienced severe valuation compression because of investor concerns about AI. The Fund believes the market is underestimating the durability of these businesses despite continued revenue and profit growth. It sees Morningstar and the broader cohort as possessing substantial addressable markets, sustainable competitive advantages, and attractive long-term growth opportunities. The thesis depends on fundamentals remaining intact and valuation multiples eventually normalizing as AI fears become less indiscriminate.
“This significant divergence between growth and stock performance represents valuation compression”
Key risks
- AI could reduce the competitive differentiation of established investment research and information platforms.
- Valuation compression could persist even without a material deterioration in operating performance.