Review and Outlook

as of 03/31/20

U.S. equity markets suffered their worst quarter since the 2008 financial crisis, abruptly ending the longest bull market in U.S. history. U.S. equities achieved new all-time highs in mid-February before falling sharply as the spread of the COVID-19 virus worsened outside of China, raising concerns about global health risks and impacts on global supply chains and economies. The situation was made worse by an escalating oil price war between Russia and Saudi Arabia, which sent oil prices tumbling more than 20% in early March. Despite the Federal Reserve’s drastic actions and Washington’s massive stimulus plan to counter the coronavirus-induced economic slowdown, stock prices remained under pressure as the number of reported cases continued to rise globally.

Against this backdrop, Baron Asset Fund declined. No sector contributed in a particularly challenging period for the market. Holdings in Information Technology (IT), Consumer Discretionary, and Financials detracted the most. Top detractor Gartner, Inc. and third largest detractor Guidewire Software, Inc. led declines within IT. Second largest detractor Vail Resorts, Inc. led declines within Consumer Discretionary. Within Financials, Arch Capital Group Ltd. detracted the most as shares of this specialty P&C insurer declined on investor concerns that business interruption and event cancellation claims would spike due to widespread business closures.

Throughout its 30-plus year history, Baron Asset Fund has been a long-term investor in businesses that we believe will benefit from long-lived secular growth trends, with sustainable competitive advantages, led by exceptional management teams. We believe that we have created value for our investors during this time by understanding and analyzing businesses better than many others. We have never believed that we can create value by understanding remarkably complex and inherently uncertain macroeconomic events, such as the ones we are now living through, better than others.

Although we are, of course, closely following the unprecedented social, political and economic effects stemming from the COVID-19 pandemic, we are not making meaningful changes to the portfolio based on them. Instead, we continue to follow our tried and true approach, with an emphasis on ensuring that businesses in our portfolio have sufficient financial flexibility and balance sheet strength to weather these unprecedented times.

The most recent periods of extreme uncertainty and disruption in the equity markets – the 2008 financial crisis and the aftermath of 9/11 – proved to be attractive times to make long-term investments in high-quality, mid-sized growth stocks. We are optimistic that this current period will ultimately provide similar upside for our portfolio.

Top Contributors/Detractors to Performance

as of 03/31/20


  • Veeva Systems Inc. offers cloud-based software solutions tailored mostly to the life sciences industry. Shares appreciated on investor expectations that COVID-19 disruptions should have relatively less impact on the stock. With exposure to the more defensive life sciences vertical; a growing, leading, and differentiated product line; a strong liquidity position; a subscription-based business model; and an attractive profitability profile, we think Veeva remains well- positioned for outsized long-term growth.
  • DexCom, Inc. sells continuous blood glucose monitoring devices for patients with diabetes. The stock rose after the company reported significantly higher sales and profit in the fourth quarter driven by strong demand for the company's G6 device. Although we expect DexCom's growth to experience some disruption from the COVID-19 pandemic, we continue to believe DexCom has a long runway for growth.
  • Clarivate Analytics Plc, a provider of IP and scientific information and services, contributed to performance on solid fourth quarter earnings, which provided optimistic views on 2020 performance. We expect the company to be relatively well positioned to manage through a challenging macro backdrop given its high recurring revenue base and bestselling products. We believe that Clarivate will be a steady earnings compounder, which should drive solid returns for the stock over a multi-year period.


  • Shares of Gartner, Inc., a provider of syndicated research, detracted from performance on investor expectations that Gartner’s destination events business, which represents approximately 11% of revenue, will be disproportionately impacted by the COVID-19 pandemic. We believe that this headwind is transitory, and the company’s core research business should remain resilient despite elevated uncertainty.
  • Shares of global ski operator Vail Resorts, Inc., declined in the quarter as the company closed all its resorts in mid-March for the remainder of the ski season due to the COVID-19 outbreak. Despite the significant decline in earnings, we believe Vail should be able to get through the disruption and maintain its dividend, given a strong balance sheet and free cash flow profile with manageable debt maturities over the coming years.
  • Shares of P&C insurance software vendor Guidewire Software, Inc. detracted from performance on full-year guidance that missed analyst estimates. Guidewire has emerged as the leading core systems vendor to the P&C insurance industry, as it is early in its replacement cycle and has tripled its addressable market through new products and cloud delivery. Over time, we believe Guidewire will be the most critical software vendor for the global P&C insurance industry, capturing 30% to 50% of its $15 billion to $30 billion total addressable market and generating margins in excess of 40%. 

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.