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Should You Consider Investing in CoStar Group (CSGP)?

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Baron Funds, an asset management firm, published its “Baron Asset Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A decline of 0.14% was delivered by the fund’s institutional shares for the third quarter of 2021, while the Russell Midcap Growth Index (the “Index”) declined 0.76%, and the S&P 500 Index gained 0.58%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron Asset Fund, in its Q3 2021 investor letter, mentioned CoStar Group, Inc. (NASDAQ: CSGP) and discussed its stance on the firm. CoStar Group, Inc. is a Washington, D.C.-based commercial property company with a $33.2 billion market capitalization. CSGP delivered a -9.05% return since the beginning of the year, while its 12-month returns are down by -5.07%. The stock closed at $84.06 per share on November 16, 2021.

Here is what Baron Funds has to say about CoStar Group, Inc. in its Q3 2021 investor letter:

"Outperformance of investments in Communication Services and Industrials, higher exposure to the better performing Health Care sector, and lack of exposure to the lagging Consumer Staples sector added the most value. CoStar Group, Inc. performed well after investors cheered the company’s decision to enter the residential real estate market."

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Based on our calculations, CoStar Group, Inc. (NASDAQ: CSGP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CSGP was in 49 hedge fund portfolios at the end of the first half of 2021, compared to 43 funds in the previous quarter. CoStar Group, Inc. (NASDAQ: CSGP) delivered a 3.82% return in the past 3 months.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. Recently we came across a high-growth stock that has tons of hidden assets and is trading at an extremely cheap valuation. We go through lists like the 10 best growth stocks to buy to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.

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