Baron Growth Fund (BGRIX)

Portfolio Management

RonBaron
Ron Baron

Fund Manager since 1994

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Fund Description

Baron Growth Fund invests primarily in small growth companies.

   

  

Fund Resources

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Ron Baron on investing in small companies.

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Attribution Analysis
Attribution as of 9/30/14

Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 9/30/2014)

The Review and Outlook for period ending September 30, 2014 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 9/30/2014)
  • Shares of athletic apparel company Under Armour, Inc. increased in Q3. Under Armour continues to have brand momentum. Sales are growing faster than 30% in nearly all categories, and sales of higher priced merchandise and postponed inventory liquidations have boosted gross margins. Operating expenses rose as the company invested for future growth in women's apparel, footwear, international, and direct-to-consumer selling. The company has clearly diversified from a single product/category into a global sports brand.

  • Community Health Systems, Inc. is one of the largest hospital operators in the U.S., with a focus on small and mid-sized markets in 29 states. Shares rose on strong Q2 results, driven by higher utilization and an improved payor mix stemming from health care reform and the improving economy. Management's volume initiatives are taking hold. More states with large Community footprints are pursuing Medicaid expansion. Finally, the integration with HMA is going well, and we think synergies will ultimately exceed initial guidance.

  • Shares of Concur Technologies, Inc. increased in Q3. Concur is a leading provider of travel booking and expense management software.  On September 18, SAP SE announced an agreement to acquire Concur for $129 per share, a 28% premium to the closing price on September 2, the day before Bloomberg reported that Concur was exploring a sale. The $8.3 billion acquisition implied a valuation of roughly 9.7 times Concur’s estimated fiscal year 2015 revenue and confirmed our view that Concur was a valuable strategic asset.

Detractors (for quarter ended 9/30/2014)
  • Shares of industrial machinery company Colfax Corporation fell in the wake of weaker-than-expected Q2 results. Strong margins in welding were offset by operational missteps in the legacy fluid handling business combined with a weak macro environment. Colfax recently announced a new president for the fluid handling business, and we expect this business to get back on track soon. We believe that Colfax will continue to use its proven business strategy to improve operations at acquired companies, generating substantial shareholder value over time.

  • Shares of Financial Engines, Inc., a service provider to defined contribution plans and individual investors, fell in Q3. While the company continues to penetrate the market, investors have become concerned about profitability and competition. Gross profit yield remains under pressure as plan providers use their gatekeeper position to receive a higher share of the economics. Investors are also concerned that cheaper target date funds could take market share. We retain conviction given what we believe are the company's unique product and significant market opportunity.

  • Shares of Benefitfocus, Inc. fell in Q3, partly due to a secondary offering in July that increased the public float by more than 30%. Benefitfocus is the leading provider of cloud-based benefits software, offering an integrated suite of solutions to help customers more efficiently shop, enroll, manage, and exchange benefits information. We think Benefitfocus serves an addressable market more than 100 times larger than its current business, which should allow it to compound revenue at more than 30% annually.

Quarterly Attribution Analysis

This Fund does not have an Attribution Analysis for this time period.

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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 PA2.0 Performance Analytics Software.