Welcome, Fools, to part 57 of our several-thousand-part series, "Better Know a Stock Picker," which is loosely, but not too loosely, based on Stephen Colbert's "Better Know a District" from The Colbert Report.
Like Stephen and his thorough investigations into America's congressional districts, each week I take a look at a fund you may want to own. What's on tap this week?
|
Baron Growth (BGRFX) |
|
|---|---|
|
Expense ratio |
1.31% |
|
Fund size |
$6.8 billion |
|
1-year return |
15.52% |
|
5-year return |
14.00% |
|
10-year return |
13.02% |
Source: Baron Capital Management. As of June 30, 2007.
Top 5 stock holdings
|
Company |
% of Assets |
|---|---|
|
Wynn Resorts |
2.7% |
|
Dick's Sporting Goods |
2.4% |
|
Station Casinos |
2.2% |
|
CB Richard Ellis |
2.2% |
|
J. Crew Group |
2.1% |
Source: Baron Capital Management. As of June 30, 2007.
Meet Ron Baron
The fightin' team at Baron Growth is led by Ron Baron, who spent his early years as an analyst working for the likes of Peter Lynch and George Soros. Today, he's the founder and principal of Baron Capital Management, and enough of an investing guru to earn a page at a site dedicated to investing gurus.
How did it happen? First, Baron made a name for himself as a superstantial short seller during the 1973-74 bear market. Then, after years as a Wall Street analyst, Baron hung out a shingle in 1982.
Baron would create the Baron Asset (BARAX) fund five years later, months before the Black Monday crash. Bad timing? Sure, but Baron Asset has beaten both the S&P 500 and Russell 2000 indexes by more than two percentage points annually. Eat that, Wall Street.
How he invests
And Baron didn't stop there. He created Baron Partners (BPTRX) in 1992 and Baron Growth in 1994. At 60, he still has the gravitas to manage all three. (Though, in 2003, he asked Andrew Peck to co-manage Baron Asset.)
With each, he seeks small caps. Here's how the good folks at GuruFocus.com put it in Baron's bio at the site:
Baron invests in small and mid-size growth companies. He likes companies with open-ended growth opportunities and defensible niches. He applies a bottom-up company research, invests for [the] long term, and tries to purchase companies at what he believes are attractive prices.
Baron Growth has seen plenty of gravy from Baron's small-cap cooking. Through June 30, the fund has outperformed both the Russell and the S&P by roughly six percentage points annually.
Call it the rewards of patience. Unlike the Street's stockinistas, who, on average, turn over 144% of their portfolios annually, Baron refuses to run in the hamster wheel parked outside Wall and Broad in lower Manhattan. Instead he holds stocks for four to five years, hoping for a double or better in that period.
Is this fund for you?
I'm a big fan of Baron's investing approach and, thus, Baron Growth. What I don't like is its price tag: a 1.31% expense ratio is a tad high for a fund with $6.8 billion in assets. But if you're going to pay a premium, you're very unlikely to do better than Baron.
If cheaper options are more to your liking, I encourage you to check out the small-cap winners in Shannon Zimmerman's Motley Fool Champion Funds portfolio. Almost three-quarters of his picks are beating their respective benchmarks as of this writing. Intrigued? Accept a 30-day free pass to the service.
And till next time, fund nation, good night.
For more Foolish coverage of growth gurus:
- Steve Wymer takes growth from the top line.
- Modeling is serious business for John Montgomery.
- Massive growth is just the beginning for Will Danoff.
