Review and Outlook

as of 12/31/22

After a brutal nine months, stocks advanced in the fourth quarter, although growth continued to mostly lag value. The Russell 3000 Growth Index gained 2.31%. The economy remained resilient. It was also evident from many indicators, such as goods, energy, and rent prices, that inflation was cooling. There were signs of an economic slowdown on the horizon stemming from aggressive central bank tightening. The market rallied in October and November, as interest rates declined, and the Federal Reserve chair laid the groundwork to slow the pace of its monetary tightening. However, the market gave back some gains in December as the Fed dampened hopes of interest rate cuts in 2023 and remained unified and steadfast in its goal of reducing inflation to 2% from December’s rate of 6.5%.

Baron Opportunity Fund declined in the quarter. Information Technology (IT), Industrials, and Health Care investments contributed the most. Holdings within Consumer Discretionary and Communication Services detracted. With all three top contributors within the sector, IT had a solid quarter. Space Exploration Technology Corp., which makes reusable rockets, satellites, and spacecraft, led performance within Industrials. Appreciation within Health Care was led by Intuitive Surgical, Inc. after shares of this maker of the da Vinci robotic surgical system rose on solid financial results highlighted by 20% growth in procedures. Consumer Discretionary had a challenging quarter with all three top detractors within the sector. ZoomInfo Technologies, Inc. drove much of the depreciation within Communication Services. Shares of this provider of business intelligence software fell on a weaker top line outlook driven by meaningful macro weakness.

Despite the current uncertain macroeconomic environment, we remain confident in and committed to the strategy: durable growth based on long-term, innovation-driven secular growth trends. We continue to believe that non-cyclical, sustainable, and resilient growth should be part of investors’ portfolios and that our strategy will deliver solid long-term returns for our shareholders.

Top Contributors/Detractors to Performance

as of 12/31/22


  • Shares of Gartner, Inc., a provider of syndicated research, contributed to results. Business conditions remain strong, with Gartner’s research business compounding at double-digit levels. We expect sustained revenue growth and renewed focus on cost control to drive margin expansion and enhanced free cash flow generation. The company’s balance sheet is in excellent shape and can support aggressive repurchases and bolt-on acquisitions, in our view.
  • NVIDIA Corporation is a fabless semiconductor mega cap that is a global leader in gaming cards and accelerated computing hardware and software. Despite the ongoing inventory correction in gaming, shares rose as a result of continued resiliency in the company's Datacenter segment, which beat expectations. We believe NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines will generate years of durable growth.
  • Shares of mega-cap software company Microsoft Corporation fell on the back of a weak third quarter due to several macro challenges that negatively impacted results and guidance, including a 5% FX headwind to revenue growth, weakening PC demand, and a cyclical slowdown in advertising spend. While cloud computing program Azure slightly missed analyst expectations by 1% for the second straight quarter, it still posted robust 42% year-over-year growth as it helped customers optimize existing workloads. Despite short-term weakness, shares remain a must own in our large-cap portfolios.


  • Tesla, Inc. manufactures electric vehicles, related software and components, and solar and energy storage products. Shares fell due to growing investor concerns regarding volume and pricing dynamics as demand appeared to be pressured by a potential recession and higher interest rates. In addition, following Twitter's acquisition, CEO Elon Musk dedicated a material portion of his time to the company and sold Tesla shares to fund the transaction, driving investors' concern regarding his dedication to Tesla. We remain confident in Tesla's fundamentals and management team.
  •, Inc. is the world’s largest retailer and cloud services provider. Shares of Amazon were down in the quarter, as the company guided to relative weakness in margins and Cloud. We believe that Amazon is well positioned in the medium term to improve profitability and sustain premium growth. Longer term, Amazon has substantially more room to grow in e-commerce, where it has less than 15% penetration in its total addressable market; and Cloud, where it is the clear leader in the vast and growing cloud infrastructure market with large opportunities in application software.
  • Shares of Rivian Automotive, Inc., a U.S.-based electric vehicle manufacturer, fell during the quarter. Liquidity risk remained elevated with outsized cash outflow during its early production stage while investor confidence in unit economics and execution remained challenged as macro negatively impacted the industry. We retain conviction. Despite supply chain complexities, Rivian's monthly production rate has grown seven-fold since late 2021. Positive product reviews, an integrated technology approach, and unique partnerships point to an attractive long-term opportunity.

Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectuses contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99BARON or visiting Please read them carefully before investing.

The performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate; an investor's shares, when redeemed, may be worth more or less than their original cost. The Fund’s transfer agency expenses may be reduced by expense offsets from an unaffiliated transfer agent, without which performance would have been lower. Current performance may be lower or higher than the performance data quoted.

Risks:All investments are subject to risk and may lose value.

The discussion of market trends is not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed on this page reflect those of the respective writer. Some of our comments are based on management expectations and are considered “forward-looking statements.” Actual future results, however, may prove to be different from our expectations. Our views are a reflection of our best judgment at the time and are subject to change at any time based on market and other conditions and Baron has no obligation to update them

Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

The index performance is not fund performance; one cannot invest directly into an index.