The Fund’s biggest position, CoStar Group, Inc. (NASDAQ:CSGP), is an information and marketing services provider to the commercial real estate industry. The company has built a proprietary database through primary research and data collection research over a 20-year period, creating high barriers to entry. We believe its investments in R&D and a doubling of the sales force will help increase customer penetration. In addition, CoStar has made two key strategic acquisitions – Apartments.com and ApartmentFinder – that we believe offer cross-sell synergies and will accelerate growth in the vast multi-family market. CoStar currently has retention rates in the low 90% range, giving great visibility into the future earnings stream. We believe margins will improve toward 50% given the high operating leverage.
From Baron Funds' fall 2016 newsletter.
