Baron Small Cap Fund (BSCFX)

Portfolio Management

Cliff Greenberg

Fund Manager since 1997

View All Commentary by Cliff

Fund Description

Baron Small Cap Fund invests primarily in small growth companies.



Portfolio Commentary

Retail Performance

Review and Outlook (for quarter ended 12/31/2016)

The Review and Outlook for period ending December 31, 2016 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 12/31/2016)
  • Shares of Gartner, Inc., a provider of syndicated IT research, contributed to Q4 performance. We believe that Gartner’s key forward-looking metrics continue to be solid. We expect to see continued acceleration due to easing comparisons, growing productivity, and sales tactics that have been fine-tuned to match current macro conditions. We believe that the company has significant financial flexibility, and will begin to deploy capital more aggressively on share repurchases or M&A.

  • Shares of On Assignment, Inc., the second largest staffing firm in the U.S., rose in Q4 on Trump’s victory, which buoyed U.S. business sentiment and raised hopes for higher GDP growth, less offshoring, fewer financial regulations, and corporate tax reform. Strong Q3 results and a November jobs report showing low unemployment rates for college grads and higher temp penetration also helped boost the share price.

  • Shares of Cognex Corp., a leading provider of machine vision products used in manufacturing automation, contributed to Q4 performance. The company reported strong Q3 financial results driven by large orders from the consumer electronics industry and guidance for Q4 revenue that was better than Street expectations. We continue to believe Cognex has a unique business and will benefit from expanding applications for its products.

Detractors (for quarter ended 12/31/2016)
  • DexCom, Inc. sells a continuous glucose monitoring device for people with insulin-dependent diabetes. The stock fell in Q4 because management did not raise guidance as expected due to: slower hardware sales from a previously announced receiver recall, slower growth in the international business due to competition from Abbott’s Libre, and the impact of the approval and the pending launch of Medtronic’s 670G. We believe DexCom has a strong new product pipeline that will enable it to drive rapid adoption of its technology.

  • Shares of FleetCor Technologies, Inc., a global payment processing services provider, fell in Q4 following disappointing quarterly results and a modest reduction in full-year revenue guidance. Investors expected an acceleration in the second half of 2016, but organic growth modestly decelerated. Sentiment was also hit after a large contract loss and intensifying forex market headwinds into year-end. We expect these headwinds to abate and strong earnings growth to persist.

  • Shares of P&C insurance software vendor Guidewire Software, Inc. detracted in Q4 as it was forced to delay revenue on a large new deal. Guidewire is the leading P&C core systems vendor, with near-perfect retention rates, growing installed base, and accelerating adoption. The company is early in its core system replacement cycle, and has tripled its addressable market through new products and cloud delivery. We believe Accenture’s new relationship with Guidewire will help to enhance pricing and win rates and shorten sales cycles.

Quarterly Attribution Analysis (for quarter ended 12/31/2016)

The Quarterly Attribution Analysis for period ending December 31, 2016 is not yet available

Yearly Attribution Analysis (for year ended 12/31/2016)

The Yearly Attribution Analysis for period ending December 31, 2016 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.