Baron Funds, an investment management company, released its “Baron Focused Growth Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The Fund delivered strong results in the third quarter, appreciating 4.83% (Institutional Shares); however, the performance underperformed the Russell 2500 Growth Index’s (the Benchmark) 10.73% gain. The fund’s underperformance stemmed from concerns over a slowdown in economic growth affecting the fund’s more economically sensitive Consumer Discretionary stocks. Furthermore, the rise in competitive pressures has adversely affected the valuations of a few of its holdings. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its third-quarter 2025 investor letter, Baron Focused Growth Fund highlighted stocks such as Shopify Inc. (NASDAQ:SHOP). Shopify Inc. (NASDAQ:SHOP) is a commerce technology company that provides a cloud-based platform to start, scale, market, and run a business. The one-month return of Shopify Inc. (NASDAQ:SHOP) was -3.30%, and its shares gained 96.46% of their value over the last 52 weeks. On November 4, 2025, Shopify Inc. (NASDAQ:SHOP) stock closed at $160.94 per share, with a market capitalization of $210.445 billion.
Baron Focused Growth Fund stated the following regarding Shopify Inc. (NASDAQ:SHOP) in its third quarter 2025 investor letter:
“Shares of Shopify Inc. (NASDAQ:SHOP) rose 28.8% in the period, contributing 85 bps to performance. Shopify is a leading cloud-based software provider for multi-channel commerce. The company continued to deliver solid results, with second-quarter revenue up 30% year over year in constant currency, reflecting sustained market share gains driven by 29% growth in gross merchandise volume (GMV). Growth was broad-based across Shopify’s core e-commerce merchant base and supported by successful expansion into offline, international, and business-to-business channels, which grew 29%, 42%, and 101%, respectively. Shares also benefited from progress in agentic commerce, underscored by Shopify’s recently announced partnership with OpenAI, the owner of ChatGPT. We believe the company’s maturing product suite is becoming increasingly attractive to merchants of all sizes and geographies, enabling it to further expand its addressable market. We remain shareholders due to Shopify’s strong competitive positioning, innovative culture, and long runway for growth, as it still holds less than a 2% share of the global commerce market.”
Shopify Inc. (NASDAQ:SHOP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 69 hedge fund portfolios held Shopify Inc. (NASDAQ:SHOP) at the end of the second quarter, compared to 77 in the previous quarter. Shopify Inc. (NASDAQ:SHOP) delivered $2.7 billion of revenue in Q2 2025, up 31% year-over-year. While we acknowledge the potential of Shopify Inc. (NASDAQ:SHOP) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.