Do You Believe in the growth potential of Masimo Corporation (MASI)?

Baron Funds, an investment management company, released its “Baron Health Care Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned 2.54% (Institutional Shares) in the quarter compared to a 3.87% gain for the Russell 3000 Health Care Index (benchmark) and a 4.72% decline for the Russell 3000 Index (the Index). The fund trailed the benchmark due to stock selection and, to a lesser extent, active sub-industry weights. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-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 -0.21%, and its shares gained 26.13% of their value over the last 52 weeks. On May 8, 2025, Masimo Corporation (NASDAQ:MASI) stock closed at $153.58 per share with a market capitalization of $8.327 billion.

Baron Health Care Fund stated the following regarding Masimo Corporation (NASDAQ:MASI) in its Q1 2025 investor letter:

"We initiated a position in Masimo Corporation (NASDAQ:MASI), a medical device company that manufactures and sells a variety of non-invasive patient monitoring technologies. Masimo is the market leader in pulse oximetry, which measures oxygen saturation of arterial blood. The company’s differentiated pulse oximetry technology overcomes the limitations of conventional pulse oximetry by maintaining accuracy in the presence of motion and low perfusion. Masimo SET is the primary pulse oximetry technology used in the top 10 U.S. hospitals. The company has significant intellectual property protection around its technology as well as multi-year customer contracts, creating barriers to entry. The business benefits from a highly recurring revenue model driven by disposable sensors.

With new management in place, the company is exiting its consumer business and focusing its attention on the health care business. Management is guiding to 8% to 11% constant currency revenue growth and 400 basis points of operating margin expansion in 2025. Beyond 2025, we think the health care business can continue to grow in a similar range on an annual basis with room for additional margin expansion."

Masimo Corporation (NASDAQ:MASI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held Masimo Corporation (NASDAQ:MASI) at the end of the fourth quarter which was 30 in the previous quarter. Masimo Corporation's (NASDAQ:MASI) first quarter revenue grew 10% to $372 million. While we acknowledge the potential of Masimo Corporation (NASDAQ:MASI) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In addition, please check out our hedge fund investor letters Q1 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.