Baron Funds, an investment management company, released its fourth-quarter investor letter for the “Baron Health Care Fund”. A copy of the letter can be downloaded here. The fund rose 13.10% (Institutional Shares) in the quarter, compared to a 11.92% gain for the Russell 3000 Health Care Index (benchmark) and a 2.40% gain for the Russell 3000 Index (the Index). The Fund returned 10.28% for the full year, compared to 14.56% and 17.15% gains for the indexes, respectively. Strong stock selection in biotechnol ...

Core Thesis - Thermo Fisher Scientific Inc. (TMO) is positioned as a strong investment opportunity in the healthcare and pharmaceutical sectors, benefiting from structural demand and a unique business model that minimizes risks associated with drug development [2][3]. Company Overview - Thermo Fisher provides a wide range of life sciences solutions, analytical instruments, specialty diagnostics, laboratory products, and biopharma services globally, making it a key player in the healthcare innovation landscape [2]. - The company commands approximately 15% of the global life sciences tools and services market, forming a duopoly with Danaher [3]. Market Dynamics - The healthcare demand is resilient due to aging populations, rising chronic diseases, and increased healthcare spending in emerging markets, which supports long-term growth for companies like Thermo Fisher [2]. - The shift towards more complex medicine, including biologics and precision therapies, increases the demand for infrastructure providers, positioning Thermo Fisher favorably within the ecosystem [3]. Business Model - Thermo Fisher's business model focuses on embedding itself throughout the drug development lifecycle, which reduces exposure to patent cliffs and demand volatility [4]. - The company generates significant revenue from high-margin consumables tied to its installed base, creating a recurring revenue stream that enhances financial stability [4]. Financial Performance - Recent operational results indicate improving fundamentals, with the company experiencing positive organic growth and an acceleration in demand from the pharmaceutical and biotech sectors [5]. - The disciplined approach to mergers and acquisitions (M&A) is a core value driver, enhancing capabilities and supporting robust free cash flow, which benefits shareholder returns [5].

Core Insights - Bristol Gate Capital Partners' Q3 2025 investor letter indicates that the US Equity Strategy underperformed the S&P 500® Total Return Index this quarter, primarily due to limited exposure to the AI/TMT and Value sectors, which benefited from the Federal Reserve's rate cut [1] - Despite the underperformance, the portfolio achieved a 15% dividend growth over the trailing 12 months, supported by strong underlying fundamentals [1] Company Highlights - Thermo Fisher Scientific Inc. (NYSE:TMO) is highlighted as a key stock, with a one-month return of 0.53% and a 12.15% increase in share value over the last 52 weeks, closing at $583.45 per share on December 30, 2025, with a market capitalization of $219.207 billion [2] - The company reported Q2 2025 revenue of $10.85 billion, exceeding the consensus estimate of $10.68 billion, and earnings per share of $5.36, surpassing the estimate of $5.22 [3] - Thermo Fisher's stock price increased by 9% following the positive earnings release on July 23, driven by 2% organic growth and the maintenance of long-term guidance [3] Investment Sentiment - Thermo Fisher Scientific Inc. ranks 26th among the 30 Most Popular Stocks Among Hedge Funds, with 121 hedge fund portfolios holding the stock at the end of Q3, an increase from 117 in the previous quarter [4] - While acknowledging Thermo Fisher's potential, there is a belief that certain AI stocks may offer greater upside potential and lower downside risk [4]

Core Viewpoint - Thermo Fisher Scientific Inc. is positioned for growth with a focus on biopharma recovery and strategic acquisitions, enhancing its clinical trial research capabilities [2][3][4]. Group 1: Financial Outlook - Bank of America raised the price target for Thermo Fisher from $650 to $700, maintaining a Buy rating, anticipating a recovery in biopharma spending by 2026 [2]. - The firm expects current market headwinds to ease, leading to a return to normal conditions [2]. Group 2: Strategic Acquisitions - Thermo Fisher announced the acquisition of Clario for up to $9.4 billion, which includes an upfront payment of approximately $8.88 billion and potential earn-out payments based on Clario's performance [3]. - This acquisition is part of Thermo Fisher's strategy to strengthen its clinical trial research business amid increasing demand in the US [3][4]. - The deal marks Thermo Fisher's third major acquisition in the year, reflecting its commitment to capitalize on the expanding drug development and manufacturing activities in the pharmaceutical sector [3]. Group 3: Market Positioning - The acquisition of Clario positions Thermo Fisher deeper into clinical development, which is viewed as a more stable and attractive growth area compared to early-stage research [4]. - Thermo Fisher operates as a global supplier of analytical instruments, clinical development solutions, specialty diagnostics, and various services in the laboratory, pharmaceutical, and biotechnology sectors [4].

Group 1 - Harding Loevner's Global Equity Strategy reported a gross return of 2.62% and a net return of 2.52% for Q3 2025, underperforming the MSCI All Country World Index and MSCI World Index, which returned 7.74% and 7.36% respectively [1] - Year-to-date, the strategy has risen 10.61% net, compared to 18.86% and 17.83% for the respective indexes [1] - The last six months have been characterized as one of the strongest momentum phases in over 70 years, with high-momentum stocks outperforming low-momentum stocks by 45 percentage points, largely driven by advancements in AI [1] Group 2 - Thermo Fisher Scientific Inc. (NYSE:TMO) was highlighted as a key stock, with a one-month return of 2.56% and a 52-week gain of 11.44% [2] - As of December 3, 2025, Thermo Fisher's stock closed at $580.45 per share, with a market capitalization of $218.08 billion [2] Group 3 - The investor letter indicated that the Health Care sector is showing signs of recovery despite previous sales declines attributed to pandemic-inflated levels [3] - Operating fundamentals in key end markets are stabilizing, with improved hospital finances in early 2025 as volumes normalized and revenue growth outpaced expenses [3] - Medical technology and services companies are expected to gain better pricing power and a favorable sales mix if patient utilization stabilizes, while life sciences tools may benefit from improved capital budgets [3] - Thermo Fisher's management forecasted 3-6% organic revenue growth for the next year and 7% beyond 2027, which was better than investor expectations, leading to a positive stock performance [3]

Core Insights - Thermo Fisher Scientific Inc. (TMO) is a leading provider of life sciences solutions, analytical instruments, specialty diagnostics, and laboratory products, with a market cap of $220.3 billion [1] Performance Overview - TMO shares have underperformed compared to the broader market, gaining 8.7% over the past year, while the S&P 500 Index has increased by nearly 14.5% [2] - In 2025, TMO stock is up 13%, compared to the S&P 500's 16.5% rise year-to-date [2] Sector Comparison - TMO has outperformed the Health Care Select Sector SPDR Fund (XLV), which gained about 3.8% over the past year, and TMO's year-to-date gains surpass the ETF's 11.1% returns [3] Market Challenges - TMO's underperformance is attributed to economic weakness in China, pricing pressures, and cautious spending by academic institutions and governments [4] - Diagnostics in China are struggling, while Europe shows modest improvement, and the U.S. market remains stable but uncertain [4] Financial Performance - On October 22, TMO reported Q3 results, with an adjusted EPS of $5.79, exceeding Wall Street expectations of $5.50, and revenue of $11.1 billion, beating forecasts of $10.9 billion [5] - For the current fiscal year ending in December, analysts expect TMO's EPS to grow by 4% to $22.74 on a diluted basis [5] - TMO has a strong earnings surprise history, beating consensus estimates in each of the last four quarters [5] Analyst Ratings - Among 23 analysts covering TMO, the consensus rating is a "Strong Buy," with 16 "Strong Buy" ratings, two "Moderate Buys," and five "Holds" [6] - This rating configuration is less bullish than a month ago, when 17 analysts suggested a "Strong Buy" [7]

Core Insights - Diamond Hill Capital's "Large Cap Fund" underperformed the Russell 1000 Value Index in Q3 2025 despite a market rally, with the Russell 3000 Index gaining 8% and calendar-year returns exceeding 14% [1] Company Highlights - Thermo Fisher Scientific Inc. (NYSE:TMO) was highlighted in the investor letter, showing a one-month return of 6.16% and a 52-week gain of 2.11%, with a closing stock price of $567.64 and a market capitalization of $213.267 billion as of November 5, 2025 [2] - The company reported a revenue growth of 3% in Q2, reaching $10.85 billion, and is ranked 26th among the 30 Most Popular Stocks Among Hedge Funds, with 117 hedge fund portfolios holding its stock at the end of Q2 2025 [4] - Diamond Hill Capital initiated four new positions in Q3 2025, including Thermo Fisher Scientific Inc., indicating a belief that its stock price does not reflect its long-term growth potential [3]

Core Viewpoint - Baron Health Care Fund's performance in Q3 2025 was a 5.39% increase, slightly outperforming the Russell 3000 Health Care Index's 5.05% gain, but lagging behind the broader Russell 3000 Index's 8.18% increase, primarily due to stock selection offset by negative impacts from sub-industry allocations and cash holdings during a rising market [1] Group 1: Fund Performance - The Baron Health Care Fund rose 5.39% in Q3 2025 compared to a 5.05% gain for its benchmark [1] - The fund's performance was similar to the benchmark, with solid stock selection being offset by negative effects from active sub-industry allocations and cash holdings [1] Group 2: Thermo Fisher Scientific Inc. (NYSE:TMO) - Thermo Fisher Scientific Inc. is highlighted as a key stock in the fund's portfolio, with a one-month return of 4.31% and a 52-week gain of 2.15% [2] - As of October 31, 2025, Thermo Fisher's stock closed at $567.39, with a market capitalization of $214.253 billion [2] - The fund added to its position in Thermo Fisher, which is expected to achieve 3% to 6% organic revenue growth in 2026 and 2027, with potential for mid-to-high single-digit adjusted operating income growth [3] - Management anticipates that beyond 2027, Thermo Fisher could deliver over 7% organic revenue growth due to positive long-term drivers in the life sciences tools industry [3] - Thermo Fisher Scientific's revenue grew 3% to $10.85 billion in Q2 2025, and it ranks 26th among the 30 most popular stocks among hedge funds, with 117 hedge fund portfolios holding its shares [4]