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Is Clearwater Analytics Holdings (CWAN) A Smart Long-Term Buy?

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Baron Funds, an asset management firm, published its “Baron FinTech Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.65% was delivered by the fund’s institutional shares for the third quarter of 2021, compared to the S&P 500 Index, which appreciated 0.58%, and the FactSet Global FinTech Index which rose 3.72% for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron FinTech Fund, in its Q3 2021 investor letter, mentioned Clearwater Analytics Holdings, Inc. (NYSE: CWAN) and discussed its stance on the firm. Clearwater Analytics Holdings, Inc. is a Boise, Idaho-based software company with a $3.7 billion market capitalization. CWAN delivered a -5.53% for the past five days and it closed at $21.20 per share on December 02, 2021.

Here is what Baron FinTech Fund has to say about Clearwater Analytics Holdings, Inc. in its Q3 2021 investor letter:

"We participated in the IPO of Clearwater Analytics Holdings, Inc., a modern investment accounting platform that is disrupting decades-old legacy systems. Every day, Clearwater’s platform aggregates and standardizes data on over $5.6 trillion of invested assets for over 1,000 clients to provide them with a comprehensive view of their investment portfolios. Asset managers, insurance companies, and large corporations require timely and accurate information about their investment portfolios to make decisions, manage risk, measure performance, comply with regulations, and communicate with stakeholders. These businesses have historically used multiple systems that require large teams of people to manually review and enter data, correct errors, and build custom reports. Clearwater enables its clients to replace these legacy systems with cloudbased software that helps them reduce cost, errors, and risk, and save time. The company enjoys economies of scale related to its single source of investment data where securities are only processed once and are accessed by all customers. Clearwater has achieved high levels of client satisfaction with a 98% retention rate and a strong net promoter score. The company is gaining market share with an 80% win rate for new clients.

With less than a 3% share of a $10 billion addressable market, we believe Clearwater is well positioned to achieve consistent mid-20s organic revenue growth through a combination of growth from existing clients, winning new clients in core end markets, international expansion, and deeper penetration into new client types. The company has a highly recurring revenue model and attractive margins that should expand meaningfully over time. We believe that Clearwater will be a steady earnings grower, which should drive solid returns for the stock over a multi-year period."

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Based on our calculations, Clearwater Analytics Holdings, Inc. (NYSE: CWAN) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CWAN was in 25 hedge fund portfolios at the end of the third quarter of 2021. Clearwater Analytics Holdings, Inc. (NYSE: CWAN) delivered a -6.04% return in the past month.

Disclosure: None. This article is originally published at Insider Monkey.