Why One Fund Just Invested $21 Million in This Once High-Flying Software Stock

Boston-based Solel Partners disclosed a new stake in Braze (NASDAQ:BRZE), adding 745,900 shares valued at approximately $21.2 million during the third quarter, according to an SEC filing on Friday.

What Happened

On Friday, Solel Partners LP reported a new equity position in Braze, acquiring 745,900 shares with an estimated value of $21.2 million. The transaction, disclosed in a Securities and Exchange Commission (SEC) filing, reflects activity as of the quarter ended September 30. The new holding accounted for 4.1% of the fund’s $519.8 million in reportable U.S. equity assets.

What Else to Know

Top holdings after the filing:

• NYSE: UNH: $71.3 million (13.7% of AUM)
• NYSE: BRSL: $59 million (11.4% of AUM)
• NYSE: CVS: $53.8 million (10.4% of AUM)
• NYSE: SYF: $52.5 million (10.1% of AUM)
• NYSE: TNL: $46.8 million (9.0% of AUM)

As of Friday's market close, shares of Braze were priced at $28.74, down 21.2% over the past year and underperforming the S&P 500, which is up nearly 15% over the same period.

Company Overview

Company Snapshot

• Braze offers a customer engagement platform with products including data ingestion, segmentation, predictive analytics, personalization, orchestration tools, and reporting for digital brands.
• The company operates on a subscription-based software-as-a-service (SaaS) model, providing recurring revenue streams.
• It serves enterprise and mid-market clients globally, focusing on organizations seeking to enhance digital marketing and customer engagement.

Braze, Inc. is a technology company specializing in customer engagement solutions for enterprises worldwide. The company leverages a comprehensive software platform to help brands deliver personalized, cross-channel messaging and optimize user journeys at scale. With a robust suite of analytics and automation tools, Braze positions itself as a strategic partner for organizations aiming to drive retention and maximize lifetime value in increasingly digital markets.

Foolish Take

For a fund whose largest holdings include stable, cash-rich names, Solel Partners’ decision to open a sizable position in Braze is interesting. The mid-sized Boston firm added roughly $21.2 million of shares during the third quarter—a perhaps unusual move given Braze’s stock is still trading near multi-year lows after sliding more than 20% over the past year and far below its 2021 high of $94.16.

What may have caught Solel’s attention is that Braze’s fundamentals are seemingly strengthening beneath the surface. Revenue in the latest quarter jumped nearly 24% to $180.1 million, fueled by subscription growth and solid customer expansion (upsells and renewals). The company also posted another quarter of non-GAAP profitability even as GAAP losses widened to $27.8 million. Free cash flow also weakened, but Braze still operates with over $360 million in cash and cash equivalents and continues to win enterprise accounts.

So what's the biggest takeaway for long-term investors? Braze may still be trying to prove itself: growing fast but not yet consistently profitable. But if it can convert its expanding customer base and AI-driven product investments into durable cash flow, the current valuation may represent an attractive entry point rather than a value trap.

Glossary

Stake: The amount of ownership or shares an investor holds in a company.
Assets Under Management (AUM): The total market value of investments managed by a fund or investment firm.
Reportable Assets: Investments that must be disclosed in regulatory filings, such as those required by the SEC.
13F Assets: U.S. equity securities that institutional investment managers must report quarterly to the SEC on Form 13F.
Top Holdings: The largest investments in a fund's portfolio, usually by market value.
Trailing Twelve Months (TTM): The 12-month period ending with the most recent quarterly report.
Customer Engagement Platform: Software that helps businesses interact with and retain customers through personalized communication and analytics.
Predictive Analytics: The use of data and statistical algorithms to forecast future outcomes or trends.
Orchestration Tools: Software features that coordinate and automate marketing or customer communication across multiple channels.

Synchrony Financial is an advertising partner of Motley Fool Money. Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Braze. The Motley Fool recommends CVS Health and UnitedHealth Group. The Motley Fool has a disclosure policy.