Here's Why Masimo Corporation (MASI) Declined in Q3

Baron Funds, an investment management company, released its “Baron Health Care Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund rose 5.39% (Institutional Shares) in the quarter, compared to a 5.05% gain for the Russell 3000 Health Care Index (benchmark) and an 8.18% gain for the Russell 3000 Index (the Index). The Fund performed similarly to the Benchmark this quarter. Solid stock selection was primarily offset by negative effects from active sub-industry allocations and cash holdings during a rising market. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Baron Health Care Fund highlighted stocks such as Masimo Corporation (NASDAQ:MASI). Incorporated in 1989, Masimo Corporation (NASDAQ:MASI) is a medical technology company that provides various patient monitoring technologies, automation, and connectivity solutions. The one-month return of Masimo Corporation (NASDAQ:MASI) was -3.52%, and its shares lost 4.35% of their value over the last 52 weeks. On November 3, 2025, Masimo Corporation (NASDAQ:MASI) stock closed at $144.96 per share, with a market capitalization of $7.87 billion.

Baron Health Care Fund stated the following regarding Masimo Corporation (NASDAQ:MASI) in its third quarter 2025 investor letter:

"Partially offsetting the above was poor stock selection in health care equipment coupled with higher exposure to this lagging sub-industry, which was a 160 basis point drag on performance. Weakness in health care equipment was broad based, led by declines from Masimo Corporation (NASDAQ:MASI) and Boston Scientific Corporation. Masimo is a medical device company that manufactures and sells a range of non-invasive patient monitoring technologies, best known for its pulse oximeters that measure blood oxygen levels. Shares fell after the company reported quarterly results that raised concerns about a steep decline in incremental contract value. However, this metric is inherently uneven, as it depends on deal timing and when contracts come up for bid. By contrast, unrecognized contract revenue (the backlog) remains strong. We believe stable compounding in Masimo’s core health care business, together with cost rationalization and disciplined spending, should allow the company to achieve its goal of more than doubling earnings per share within five years."

Masimo Corporation (NASDAQ:MASI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 36 hedge fund portfolios held Masimo Corporation (NASDAQ:MASI) at the end of the second quarter, compared to 37 in the previous quarter.  While we acknowledge the potential of Masimo Corporation (NASDAQ:MASI) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Masimo Corporation (NASDAQ:MASI) and shared a bullish thesis on the company. Baron Health Care Fund increased its position in Masimo Corporation (NASDAQ:MASI) during Q2 2025. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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