Baron Discovery Fund (BDFIX)

Portfolio Management

RandolphGwirtzman
Randolph Gwirtzman

Fund Manager since 2013

View All Commentary by Randolph LairdBieger
Laird Bieger

Fund Manager since 2013

View All Commentary by Laird

Fund Description

Baron Discovery Fund invests primarily in small growth companies.
 

Fund Resources

Latest Fact Sheets
  Standard Fact Sheet

Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 3/31/2014)

The Review and Outlook for period ending March 31, 2014 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 3/31/2014)
  • Flotek Industries, Inc. is a leading supplier of specialized chemicals to the oil & gas industry. Its proprietary citrus oil based products are experiencing rapid growth related to the boom in shale oil drilling in the U.S. and Canada. Flotek shares were up sharply in Q1 as investors are increasingly recognizing the significant revenue and earnings growth potential of Flotek’s products. Flotek is still early in penetrating the market for its products and we continue to see strong upside in the shares over time.

  • Biopharmaceutical company Revance Therapeutics, Inc. was a contributor in Q1. The company benefited from investor excitement over RT-001, Revance’s topical version of Allergan’s Botox (which is injected). We believe this drug will be approved following its Phase 3 trials and we are excited about the potential for it to take share from existing neuromodulators.

  • Coupons.com Inc. is a leading digital couponing platform. We participated in Coupons.com’s recent IPO as we believe it should benefit from secular growth around the early penetration of digital coupons. Digital coupons represented less than 1% of U.S. coupons in 2012, but accounted for almost 7% of total coupons used. Looking ahead, we believe that Coupons.com will benefit from the increasing prevalence of online couponing through mobile app offerings from retail loyalty programs and companies like Paypal.

Detractors (for quarter ended 3/31/2014)
  • PDF Solutions, Inc. provides yield management services to the semiconductor industry. It uses a combination of consulting services, proprietary hardware, and a database developed over more than a decade to advise the largest manufacturers of semiconductors in the world. Shares traded down in Q1 after investors grew concerned when another small company in the industry lost a major customer. While we are mindful of industry risks, we believe that PDF is undervalued and will significantly grow its recurring royalty stream over the next few years. 

  • With over $750 million in sales across 64 stores, The Container Store Group, Inc. is the leading retailer of storage and organization products in the U.S. The company went public late last year to help grow its footprint to its ultimate goal of 300 stores. While its first quarterly results as a public company were good, the stock came under pressure as expectations and valuation moved ahead of business fundamentals. Despite the pullback, we remain positive on management’s ability to grow the chain into a leader in its niche.

  • Barracuda Networks, Inc. offers cloud-connected solutions that help its customers address security threats, improve network performance, and protect and store their data. After strong post-IPO performance in Q4, Barracuda gave back some of its profits in Q1. We believe there are secular trends behind Barracuda’s ability to grow profitably over the next three-five years, and we like its strategic plan to acquire new customers while increasing its revenue from existing customers.

Quarterly Attribution Analysis (for quarter ended 3/31/2014)

The Quarterly Attribution Analysis for period ending March 31, 2014 is not yet available

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The prospective performance of the companies discussed herein is based on our internal analysis and reflect our opinions only. We cannot promise future returns and our opinions are a reflection of our best judgement at the time of publication. Our views are not intended as recommendations or investment advise to any person and are subject to chage at any time based on market and other conditions and Baron has no obligation to update them. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.

Source: FactSet PA.