Guidewire Software (GWRE, Financial) was a notable contributor to the Baron FinTech Fund's performance in Q1 2023. The company, a leading provider of software for the property and casualty (P&C) insurance industry, has crossed the mid-point of its cloud transition and is demonstrating more consistent recurring revenue growth and durable gross margin expansion. The fund believes Guidewire will be the critical software vendor for the global P&C insurance industry, capturing a significant share of its total addressable market. The recent acquisition of Guidewire's largest competitor by a private equity firm is expected to enhance Guidewire's win rates and pricing power.
"Shares of property and casualty (P&C) insurance software vendor Guidewire Software, Inc. contributed to performance for the quarter. The company has crossed the mid-point of its cloud transition and is now demonstrating more consistent recurring revenue growth and durable gross margin expansion. We believe Guidewire will be the critical software vendor for the global P&C insurance industry, capturing 30% to 50% of its $15 billion to $30 billion total addressable market and generating margins above 40%. During the quarter, Guidewire’s largest competitor was acquired by a private equity firm at a meaningful premium to Guidewire’s current valuation. We believe this acquisition will enhance Guidewire’s win rates and pricing power while highlighting the significant valuation upside relative to the current share price." — Baron FinTech Fund, Q1 2023 Fund Letter
Read full letter at gurufocus Baron FinTech Fund 2023 Q1 page.
