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

4Q15 Quarterly Letter

Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 12/31/2015)

The Review and Outlook for period ending December 31, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 12/31/2015)
  • M/A-COM Technology Solutions Holdings, Inc. designs and manufactures high end analog semiconductors used for industrial, military, and communications end markets. Shares rose in Q4 as M/A-COM executed on its strategy to gain share in key markets such as military radar, cellular base stations, and optical communications, including high volume data center applications. We believe M/A-COM has many years of strong revenue growth ahead of it, and that it can significantly expand its margins.

  • Pacira Pharmaceuticals, Inc. is a specialty pharmaceutical company that sells a long-lasting pain medication called EXPAREL. Pacira resolved some major marketing issues with the FDA, which helped boost share price in the quarter, and which we think will potentially allow for accelerated growth in 2016. Run rate sales of EXPAREL are now approximately $250 million and we think the market could be worth billions.

  • Shares of JUST EAT plc, an online marketplace for restaurant delivery in Europe, Latin America, and Canada, were up in Q4, primarily on growth reported for Q3 that exceeded Street expectations. We remain invested, as we believe management is executing well and the company is solidifying its #1 position across most of its markets in what we think will be a winner-take-most (or all) business with attractive long-term economics.

Detractors (for quarter ended 12/31/2015)
  • Shares of Iconix Brand Group, Inc., a  brand licensing company, were a detractor in Q4. Iconix underwent a management change, restated its financial statements, and lowered its earnings guidance. The company also has a bond maturity in June 2016 that it is working to refinance. We sold the position as we were concerned with Iconix’s ability to refinance the upcoming bond maturity at a price that we consider reasonable.

  • The share price of Fiesta Restaurant Group, Inc., operator of two fast casual restaurant chains in the southern U.S., was down in Q4 due to weaker same-store sales and margin compression related to new store openings, which have driven earnings estimates for 2015 and 2016 lower. We remain shareholders, as we believe unit-level economics at the company’s new stores are attractive and will drive re-accelerated earnings growth next year and thereafter.

  • Intersect ENT, Inc. sells a drug-coated device called Propel that is implanted in patients who have had surgery for chronic sinusitis. Shares declined in Q4 after Intersect substantially lowered guidance for revenue growth. We think it is likely that management’s explanation of its sales force's growing pains is the true culprit. However, we have also grown concerned that adoption has slowed due to the expense of the device versus “off label” techniques that are not FDA approved. We sold our position while we assess this issue.

Quarterly Attribution Analysis (for quarter ended 12/31/2015)

The Quarterly Attribution Analysis for period ending December 31, 2015 is not yet available

Yearly Attribution Analysis (for year ended 12/31/2015)

The Yearly Attribution Analysis for period ending December 31, 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.