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Is Now the Perfect Time to Invest in Couchbase (BASE)?

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Baron Funds, an asset management firm, published its “Baron Discovery Fund” fourth quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 3.13% was delivered by the fund’s institutional shares for the fourth quarter of 2021, which was better than the Russell 2000 Growth Index's 0.01% return, but below the S&P 500 Index's gain of 11.03% for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.

Baron Discovery Fund, in its Q4 2021 investor letter, mentioned Couchbase, Inc. (NASDAQ: BASE) and discussed its stance on the firm. Couchbase, Inc. is a Santa Clara, California-based public software company with a $963.8 million market capitalization. BASE delivered a -14.34% return since the beginning of the year and it closed at $22.11 per share on January 20, 2022.

Here is what Baron Discovery Fund has to say about Couchbase, Inc. in its Q4 2021 investor letter:

"In the fourth quarter, the Fund was down 3.13% versus the Russell 2000 Growth Index, which was roughly unchanged. For the full-year 2021, the Fund was up 4.89% and beat the 2.83% return of the Russell 2000 Growth Index by 2.06%. The lion’s share of the underperformance in the fourth quarter was due to stock selection in the Information Technology (IT) and Health Care sectors. In IT, there was a fairly even spread of winners and losers for the quarter, though IPO profit taking affected Couchbase, Inc. after big third quarter gains.

Couchbase, Inc. provides modern database software that collects and stores data and powers enterprise applications, for which there is no tolerance for disruption, inaccuracy, or downtime. We wrote about our initial investment in this exciting company in our last quarterly letter. Its solution is fast (it utilizes caching, or retrieval from memory versus hard drives), scales to large amounts of records (which is expensive for old-style relational databases, and not even possible with some of the other NoSQL solutions), and works in all settings (on-premise, in the cloud, or in mixed hybrid environments). Couchbase, with revenues of $150 million, is addressing a large total market of $62 billion, which is slowly migrating to the cloud and using less rigid database structures. We added to our investment in the quarter when shares sold off due to multiple compression in the software sector. We believe that the selling was significantly overdone, and Couchbase now sells at a multiple that is about 25% of its main competitor. We believe that on an absolute and relative basis this 25%-plus grower is meaningfully undervalued."

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Photo by Danial Igdery on Unsplash

Our calculations show that Couchbase, Inc. (NASDAQ: BASE) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. BASE was in 13 hedge fund portfolios at the end of the third quarter of 2021. Couchbase, Inc. (NASDAQ: BASE) delivered a -44.63% return in the past 3 months.

You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.

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