Baron Growth Fund (BGRIX)

Portfolio Management

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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Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 6/30/2015)

The Review and Outlook for period ending June 30, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 6/30/2015)
  • Shares of U.S. hospital operator Community Health Systems, Inc. surged with the U.S. Supreme Court decision to uphold subsidies under the Affordable Care Act, insuring that Community Health will continue to experience lower bad debt, higher volumes, and better payer mix under the law. Q1 results beat expectations as a strengthening macro environment and management initiatives helped drive improvements in core organic operating metrics, including admissions, surgeries and ER visits. We believe synergies from the Health Management Associates acquisition will exceed initial guidance, and we maintain our positive outlook for the company.

  • Shares of The Middleby Corp., a leading food equipment manufacturer, rose in Q2 on the company’s announcement that it was in preliminary discussions to acquire AGA Rangemaster Group plc, a U.K.-based residential kitchen equipment manufacturer. While there is no certainty that this deal will close, the potentially accretive acquisition highlighted Middleby’s acquisition acumen as well as its commitment to grow the residential kitchen equipment business through brand and geographic expansion.

  • Arch Capital Group Ltd. is a specialty insurance and reinsurance company based in Bermuda. The company reported solid Q1 financial results with 15% growth in book value per share. Despite a soft reinsurance pricing environment, underwriting profitability remains strong, catastrophe losses remain benign, and the company continues to experience favorable reserve development. The share price has also benefited from M&A activity and speculation in the P&C insurance industry.

Detractors (for quarter ended 6/30/2015)
  • Shares of leading shortline railroad Genesee & Wyoming, Inc. declined in Q2 for three reasons: 1) exposure to Australia, where mining carload volumes have been impacted by weaker commodity prices; 2) soft U.S. coal and steel shipments; and 3) foreign currency headwinds. We maintain a positive long-term view on the company and believe valuation is attractive. Barriers to entry are substantial and we think that, as the only public shortline, Genesee is well positioned to execute on its growth strategy.

  • Shares of ITC Holdings Corp., the nation’s largest independent transmission company, fell in Q2 along with most of the utility sector over interest rate concerns. Company-specific issues, including a potential regulatory cut to the allowed return on equity and questions around ITC’s ability to execute on the development portion of its five-year capital expenditure plan, also weighed on the stock. We continue to hold the stock as we believe ITC has robust growth prospects and will execute on its growth strategy and capital expenditure plan.

  • Shares of United Natural Foods, Inc., the largest distributor of natural, organic, and specialty products to North American supermarkets, declined in Q2 on a slight deceleration in sales growth that we believe will prove temporary. The natural and organic food sector is one of the brightest categories within grocery, and United Natural has been the leader in getting these products to market. We are also excited about a recent acquisition that we believe could double the company’s addressable market opportunity in fresh and perishable foods.

Quarterly Attribution Analysis (for quarter ended 6/30/2015)

The Quarterly Attribution Analysis for period ending June 30, 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 PA2.0 Performance Analytics Software.