Baron Partners Fund on CoStar Group, Inc.
Thesis
CoStar is the leading information and marketing platform serving commercial and residential real estate, but its valuation compressed sharply as investors generalized AI disruption fears across information-service businesses. Baron believes the market reaction is disconnected from CoStar's underlying competitive position. The company owns differentiated real-estate datasets and has meaningful growth opportunities across information, analytics and marketplaces. CoStar also has a substantial cash balance that could be deployed into share repurchases at depressed prices. The fund therefore continues holding the shares despite the severe quarterly decline.
“We continue to own CoStar due to its enviable business model, differentiated data assets, and meaningful growth opportunities in providing enhanced real estate information, analytics, and marketplace offerings.”
Key risks
- AI could reduce the value of portions of CoStar's information products
- Real-estate market weakness could affect customers and growth
- Management may not use excess cash for aggressive repurchases