Baron Discovery Fund Expects Strong Growth and Margin Expansion for Mercury Systems (MRCY)

Core Insights - Baron Discovery Fund's year-to-date performance is up 10.75%, slightly trailing the Russell 2000 Growth Index's return of 11.65% [1] - In Q3 2025, the fund gained 2.85%, while the Index returned 12.19% [1] Company Overview: Mercury Systems, Inc. - Mercury Systems, Inc. has a market capitalization of $4.648 billion and specializes in components for aerospace and defense [2] - The stock experienced a one-month return of -4.61% but has increased by 132.06% over the past 52 weeks, closing at $77.44 on October 29, 2025 [2] Performance and Growth - Mercury Systems reported a revenue of $273 million in Q4 2025, reflecting a year-over-year increase of 9.9% [4] - The company has shown significant progress under CEO Bill Ballhaus since restructuring began in 2023, leading to margin expansion and benefiting from increased defense spending [3] Investment Sentiment - Mercury Systems is not among the top 30 most popular stocks among hedge funds, with 28 hedge fund portfolios holding the stock at the end of Q2 2025, up from 23 in the previous quarter [4] - While the potential for Mercury Systems as an investment is acknowledged, there is a belief that certain AI stocks may offer greater upside potential with less downside risk [4]