Baron Discovery Fund (BDFIX)

Portfolio Management

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 6/30/2015)

The Review and Outlook for period ending June 30, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 6/30/2015)
  • Shares of Zoe’s Kitchen, Inc., owner of fast-casual Zoe’s Kitchen restaurants, increased in Q2. The company reported better-than-expected same store sales and margins for Q1, increased full-year guidance, and indicated that stores in new markets are opening with greater volume and achieving more volume in mature units faster than initially expected. We think Zoe’s is a highly differentiated, fast-growing restaurant concept with a long runway for return-generative growth, and we remain shareholders.

  • Inogen, Inc. is the leading provider of portable oxygen concentrators (POC) used by chronic respiratory patients reliant on long term oxygen therapy. Shares rose in response to the favorable conclusion of an internal audit that had delayed the report of year-end 2014 results, 2015 guidance that exceeded Wall Street consensus expectations, and a Q1 revenue and earnings beat. We think the POC market is underpenetrated, Inogen’s products are best-in-class, and its leadership position in the direct-to-consumer market represents a significant competitive advantage.

  • Shares of Boot Barn Holdings, Inc., the largest U.S. specialty retailer of Western clothing and footwear, were up in Q2. The company beat Street expectations for Q1, indicated that new stores in existing and new markets are opening at better-than-expected productivity rates, and acquired one of its large regional competitors at an accretive valuation that should accelerate earnings growth. We believe Boot Barn is one of the most exciting concepts in retail apparel and offers both organic and external growth via acquisitions of regional chains.

Detractors (for quarter ended 6/30/2015)
  • The Spectranetics Corporation is a medical device company that specializes in equipment that clears plaque from cardiac and peripheral (arm and leg) arteries. After the company reported that it had missed revenues in Q1 and lowered full year guidance, shares fell. We believe the market misunderstood certain dynamics, and based on our conversations with management and industry experts, bought more near the bottom.

  • Foundation Medicine, Inc. is a cancer testing and information services company. Shares more than doubled in Q1 after Roche announced it was purchasing a majority position. As the position had become quite large in the portfolio, we sold off some of our position. After the Roche transaction closed, the company announced test volumes slightly lower than consensus estimates. Shares fell to trade at a 35% discount to what Roche believes they are worth. We expect to earn significant returns from current levels.

  • Aerie Pharmaceuticals, Inc. is developing a glaucoma medication called Rhopressa. In Q2, Aerie reported results from the first of two pivotal Phase 3 trials. While various data cuts showed potential and the drug inarguably lowered pressure, the primary endpoint of non-inferiority to Timolol was not met, and shares fell sharply. We exited our position.

Quarterly Attribution Analysis (for quarter ended 6/30/2015)

The Quarterly Attribution Analysis for period ending June 30, 2015 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.