Baron Discovery Fund (BDFIX)

Portfolio Management

RandolphGwirtzman
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 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 The Spectranetics Corporation, a provider of medical devices for removing arterial plaque and the leads of old heart regulating devices, were up in Q3. As we expected, management rebounded from a Q1 misstep in sales execution, and the issuance of $230 million in convertible debt related to a strategic acquisition. In July, Spectranetics received approval of a major product indication, which we believe could triple its current market opportunity.

  • Shares of Intersect ENT, Inc. increased in Q3 on reports of solid Q2 results, as well as positive clinical trial data related to its pipeline product, Resolve. Intersect sells implants that deliver localized anti-inflammatory medication in patients who have had surgery to relieve chronic sinusitis. The company's technology is unique, and we believe the target market will expand over the next several years as Intersect introduces follow-on products designed to address different stages in the chronic sinusitis treatment paradigm.

  • Pacira Pharmaceuticals, Inc., a specialty pharmaceutical company, was a solid performer in the quarter. Sales of its injectable, long-lasting pain medication EXPAREL continued to grow rapidly (up 195% in Q2), driven by increasing hospital adoption and usage in surgical procedures. Run rate sales of EXPAREL are now about $180 million, and we believe the market could be worth billions.

Detractors (for quarter ended 9/30/2014)
  • Shares of E2open, Inc., a provider of cloud-based software that helps some of the world’s largest companies manage their complex manufacturing supply chains, decreased in Q3. In September, the company pre-released Q3 earnings. While the quarter was good, E2open took down full year guidance due to the loss of three customers who were acquired (and in two cases, shut down operations). We continue to believe that E2open’s solution is sticky, valuable to customers, and difficult to replicate.

  • Shares of online health insurance broker eHealth, Inc. fell in Q3 on news that the Affordable Care Act had translated into far fewer commissions to eHealth than expected. We also learned from management’s discussion of Q2 results that the influx of new insurers servicing state exchanges significantly muddled commission reporting and thereby the key transmission mechanism of eHealth’s revenue stream.

  • Shares of Foundation Medicine, Inc. declined in Q3 as a result of concerns regarding the timing and amount of reimbursement by third-party payors for the company’s product and the evolving competitive landscape. Foundation Medicine markets a sequencing-based cancer test that identifies genetic alterations and allows physicians to match the genetic alterations with therapies.

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 PA.