Ron Baron

Ron Baron

Last Update: 2014-09-10

Number of Stocks: 359
Number of New Stocks: 23

Total Value: $25,186 Mil
Q/Q Turnover: 5%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Ron Baron Watch

  • DaVita HealthCare Partners is a Great Business With Solid Growth Potential

    Healthcare is a scary sector for many value investors. It sounds complicated – and often is. But DaVita HealthCare Partners is different. DaVita derives the majority of its revenues from its market-leading position in a market that has inelastic demand – kidney dialysis. It also recently acquired a more speculative business that has enormous growth potential. To top it all off, Warren Buffett (Trades, Portfolio)-anointed investment manager Ted Weschler has been buying a stake in DaVita for Berkshire. At the very least, this is a stock that every value investor should become familiar with.


    1. Company History and Business Overview

      


  • Ron Baron Comments on Guidewire Software Inc

    Guidewire Software, Inc. (GWRE) shares declined as investors rotated from growth into value stocks and from small cap into larger cap stocks. The impact was particularly acute in stocks that had been strong recent performers, such as Guidewire, as investors abandoned winners in search of recent underperformers. Guidewire is the gold standard of property & casualty core system vendors, as evidenced by near-perfect retention rates, growing installed base, and accelerating adoption of its complete product suite. We maintain conviction in the stock. (Neal Rosenberg)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Zillow Inc

    Shares of Zillow, Inc. (Z), the leading online real estate site in the U.S., were up sharply in the second quarter, due, in part, to a favorable market reaction when a notable investor took a large position in the company in April. (Ashim Mehra)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Concur Technologies Inc

    Concur Technologies (CNQR), a provider of integrated travel and expense management software solutions, declined from $130 per share at the start of the year to $80 where we purchased shares. The rotation from growth companies gave us the opportunity to purchase the leading travel and expense management software provider with a multi-billion dollar opportunity at an attractive price. Concur remains in the early stages of its growth. It has an ability to expand its customers, products and geographies, while also providing suppliers with improved access to potential clients.


    We initiated a position in Concur Technologies, Inc. after the stock fell due to a general rotation out of high growth stocks. Concur is a leading provider of integrated travel and expense management software solutions. The company sells its software on a subscription basis and delivers the software through the Internet (i.e., through the “cloud”). We believe Concur has a unique offering and a multi-billion dollar market opportunity in its core business. We expect the company to continue to grow rapidly through adding new customers, cross-selling new products,expanding into the small business market, expanding outside the U.S., and expanding into the government vertical. We also believe Concur has an opportunity to create an alternative distribution channel for travel suppliers and eliminate billions of dollars of transactions costs that are incurred annually in the travel supply chain. (Neal Kaufman)

      


  • Ron Baron Comments on Iridium Communications Inc

    Iridium (IRDM), a satellite enabled voice and data communications company, had declined from over $9 per share in 2013 to $6.10 this year when we invested in that business. Iridium provides unique and valuable communications services to the Department of Defense. It also enables machine to machine communications (The Internet of Things) as well as enabling flight safety improvements and improved airline economics.


    Iridium Communications Inc. operates a group of satellites used for worldwide voice and data communication from hand-held satellite phones and other transceiver units. The stock rose significantly in the second quarter, driven by increasing investor confidence in its growth prospects. We participated in a capital raise by Iridium, purchasing its convertible preferred stock. Iridium used its proceeds to fund the build of an advanced satellite constellation. We believe this will be a unique asset with significant growth opportunities around M2M (machine to machine) and flight safety and control (Aireon). Its Department of Defense businesses will continue to provide significant cash flow. (Gilad Shany)

      


  • Ron Baron Comments on Air Lease Corp

    Air Lease Corp. (AL) purchases commercial aircraft to lease to airlines around the world. AL currently owns 196 modern aircraft, with 331 new airplanes (worth $23 billion) on order to satisfy U.S. and European carriers’ demand for more fuel-efficient models to replace their aging fleet and emerging markets’ need for more lift. Passenger traffic growth remains strong, up 6.2% (IATA data) through May, consistent with historical trends of outpacing GDP growth. AL’s revenues (+28% in the first quarter of 2014) and earnings per share (+50%) are growing impressively as its fleet builds. An investment grade rating and strengthening credit profile should enable AL to continue to get favorable financing in the capital markets and de-risk its balance sheet with more unsecured, fixed rate debt. AL has approximately 91% of leases placed through 2016 and is well capitalized for a long “runway” of profitable growth. (David Goldsmith)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Athenahealth Inc

    Shares of Athenahealth, Inc. (ATHN), a provider of cloud-based software-enabled business services for physicians and other healthcare providers, fell after reports of lower than expected first quarter revenues and earnings. A hedge fund manager also published a short thesis that the company’s long-term margin potential is structurally lower than what many investors believe. We exited the position during the quarter. (Neal Kaufman)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Tesla Motors Inc

    Tesla Motors Inc. (TSLA) designs, develops, manufactures and sells fully electric vehicles. Tesla reported what we considered to be strong results in the first quarter, but investor reaction was negative and we took the opportunity to add to our positions when the stock price dropped in early May. Tesla continues to make progress with battery cost reduction and regulatory approvals to sell its cars directly to consumers. Both of these developments were viewed positively toward quarter end. We view Tesla as a “once in a lifetime” disruptor to the car industry and believe this justifies its premium valuation. (Gilad Shany)


    We had told you about our purchase of Tesla Motors Inc. shares in the previous letter. During the quarter, we increased our level of confidence in Tesla’s superior engineering and design, which we believe will lead to mass market appeal. Right after Tesla’s annual shareholder meeting, CEO Elon Musk announced Tesla is opening all of its intellectual property to third parties, in order to induce the electrification of the auto industry (to date, electric car programs at the major manufacturers are small to non- existent).Tesla is confident in its ability to out-innovate its competitors due to its most formidable competitive advantage - people. As of today, we believe Tesla is the only car Original Equipment Manufacturer that is able to hire talent away from top tier technology companies.The ability to keep this talent busy and engaged for the greater good, with consistent execution and commercial success, will, we believe, build Tesla’s moats for years to come.We often say “we invest in people.”Tesla invests in people, too. (Gilad Shany)

      


  • Ron Baron Comments on Hyatt Hotels Corp

    Shares of Hyatt Hotels Corp. (H), a global lodging company, increased in the second quarter after reporting strong earnings growth driven by an uptick in group business bookings. Groups comprise 45% of the company’s domestic bookings. Hyatt has also benefited from the sale of non-core assets, generating excess cash that Hyatt has used to accelerate share repurchases and purchase underperforming quality assets in new locations. We think Hyatt’s growth in units and increased revenue per available room (RevPAR) are not yet reflected in its share price. (David Baron)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Trex Co Inc

    Trex Company, Inc. (TREX) is the largest and lowest cost manufacturer of composite decking and railing in the U.S. – a category Trex pioneered in the 1990s – with 40% market share. 90% of sales stem from repair and replacement and 10% from new construction. Management, whom we respect, estimates that there are 40 million wood decks in the U.S. that will eventually rot, a significant portion of which will be replaced with composite decks. Composite represents approximately 11% of the total industry, up from 1% in 1999, with the remainder mostly wood. Consumers have opted to convert from wood to composite because composite looks similar, but performs better (doesn’t stain, rot or splinter). Trex is well positioned to benefit from this replacement demand. In addition, Trex has been growing its market share through new products and distribution wins and by expanding internationally. Trex also has recycling expertise, which it may apply to new industries in the future. (David Kirshenbaum)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Badger Daylighting Ltd

    We increased our position in Badger Daylighting Ltd. (TSX:BAD), a provider of custom-made trucks that use pressurized water and powerful vacuums to excavate in areas with buried pipes and cables. These “hydrovac” trucks are much safer than mechanical equipment and more efficient than manual digging. Hydrovac truck demand is growing rapidly, as oil and gas companies use them to build new wells and pipelines, and as utility companies increasingly use them to maintain underground infrastructure. Badger is meeting this demand by building more trucks and adding more service locations in the U.S. and Canada. With over 800 trucks and 110 locations, Badger is by far the largest provider of hydrovacs in North America, competing mostly against local mom and pops. This size advantage and the company’s manufacturing capabilities allow Badger to enjoy economies of scale and lower operating costs. Given the strong tailwinds of capital investment by the energy and utility industries, along with increasing safety pressures around accessing and maintaining existing infrastructure, we believe demand for Badger’s services should continue growing nicely. (Josh Saltman)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Masonite International Corp

    We initiated a new position during the second quarter in Masonite International Corp (DOOR). Masonite is a leading, vertically-integrated manufacturer of interior and exterior doors. In 2013, Masonite sold 32 million doors to over 7,000 customers in 80 countries. Sales are split 58% U.S., 16% Canada, and 26% rest of world. Masonite has dominant market positions in its product categories, particularly in North America, and is poised to benefit from an improvement in residential and non-residential construction activity off of depressed levels. Additionally, the doors industry has consolidated recently for certain product categories, improving Masonite’s ability to raise prices, even though capacity is underutilized. The management team is impressive and has inculcated a culture of operational discipline and innovation. We believe that EBITDA can triple as construction levels normalize and pricing firms. Accretive automation investments and acquisitions should be additive to growth. (David Kirshenbaum)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on CoStar Group Inc

    After doubling in 2013, real estate information and marketing services provider CoStar Group, Inc. (CSGP) gave back gains in the second quarter. CoStar shares were negatively impacted by sudden and significant multiple compression in high growth, highly valued stocks, which sold off acutely early in the quarter. CoStar also completed an equity offering in the quarter, which we expect will be used to finance accretive M&A over the next six months. We continue to maintain our conviction in CoStar. (Neal Rosenberg)


    The Fund added to its position in CoStar Group, Inc.,the leading provider of information and marketing services to the $50 trillion commercial real estate (CRE) industry. The company has spent 25 years building a proprietary CRE database, which has grown to include information on over four million properties and nine billion square feet of listings. The company monetizes its data through subscriptions to analytical tools, which are deeply integrated into clients’ workflows. Ongoing investments in R&D and a doubling of the sales force should allow CoStar to sell an expanded array of tools to new and existing customers. Additionally, the acquisitions of LoopNet and Apartments.com extend CoStar’s reach into marketing services and multi- family lead generation, creating vast new opportunities and offering the company dramatic revenue and cost synergies. Finally, the company’s high fixed cost base creates significant operating leverage, which we believe should help drive margins to above 40%. (Neal Rosenberg)

      


  • Ron Baron Comments on Generac Holdings Inc

    Shares of Generac Holdings, Inc. (GNRC), a manufacturer of stand-by generators, fell in the second quarter after the company reported first quarter earnings below Street expectations. The company cited difficult winter weather as a reason sales missed expectations and reiterated full year guidance, despite the quarterly miss. Weather created strong demand for Generac generators, but delayed timely installations. We continue to like Generac, based on its dominant market share in an underpenetrated market. In addition, we believe management will be successful in growing the company into a diversified, global back-up power generation business. (Rebecca Ellin)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Dick's Sporting Goods Inc

    Shares of Dick’s Sporting Goods, Inc. (DKS), a sporting goods retailer, declined in the second quarter. The company reported quarterly earnings that were modestly below Street expectations and reduced guidance for the rest of the year. The sales shortfall was concentrated in the hunting and golf categories, while other higher margin product segments had sales growth exceeding industry averages. We believe the hunting and golf issues are temporary and do not alter our long-term investment thesis. (Michael Baron)


    Dick’s Sporting Goods, Inc., the country’s largest sporting goods retailer, declined sharply after the company reported lower than anticipated earnings and reduced expectations for yearly profits. The 14.5% decline in the quarter provided an attractive price to increase our holdings. The sales shortfall was concentrated in the hunting and golf category, while other higher margin product segments have sales growth exceeding industry averages. Hunting sales were down after abnormally high revenue in 2012 related to fears of stricter regulations in the industry (that have so far appeared unwarranted). Golf sales were weak due to our belief that supplier product did not resonate with the customer. Both of these issues, in our opinion, appear temporary. The core business for Dick’s is strong with same store sales growth of 6.6%, excluding the hunting and golf categories. The company is investing to improve store level profitability and productivity while growing the number of locations at a manageable pace. We believe the stock is very inexpensive for a top quality retailer, and we believe the company has $4 of earnings potential in a few years, once it manages through the current issues. (Michael Baron)

      


  • Ron Baron Comments on Community Health Systems Inc

    Shares of hospital company Community Health Systems, Inc. (CYH) rose in the second quarter. The Affordable Care Act is already resulting in a reduction in uninsured hospital admissions, and the governors of several key states are pursuing Medicaid expansion. Over time, we think Community should benefit from synergies from its acquisition of Health Management Associates, health care reform-driven changes, aging demographics, and a shift in reimbursement to favor those that can deliver high quality patient outcomes at lower cost. (Susan Robbins)

    From Ron Baron (Trades, Portfolio)’s Baron Funds Second Quarter 2014 Report.  


  • Ron Baron Comments on Targa Resources Corp

    Finally, it was announced that Energy Transfer Partners L.P. has expressed an interest in acquiring Targa Resources Corp. (TRGP), an energy midstream MLP business that owns storage, pipelines, gathering and processing facilities in the Balkans, Gulf Coast and Permian Basin. Energy Transfer has interests in those areas that would be complemented by Targa’s properties. Energy Transfer acquired Baron Growth Fund’s investment in Southern Union (also held in several other Baron funds) in 2011. We had been an investor in Southern Union since 1995 and made about eight times our money from that initial investment, and about three times our money overall, when that business was acquired. We have owned Targa since its IPO in December 2010 and have so far made more than six times our money from that initial investment. One more thing, Energy Transfer has been an even better investment than the companies they acquired! Unfortunately, for us, we so far missed that one.


    Targa Resources Corp. is the general partner of Targa Resources Partners, a growth oriented MLP with a premier natural gas liquids midstream presence on the Gulf Coast and crude and gas midstream presence at several major shale energy regions. Shares of Targa increased significantly as Targa continued to execute on its growth projects and provided upside to its quarterly and annual guidance. Rumors of a possible acquisition of the company also sent the stock higher. We believe Targa has unique assets that will allow the general partner to show a strong dividend growth profile. (Gilad Shany)

      


  • Ron Baron Comments on Valmont Industries Inc

    I nearly always find something relevant and memorable in management meetings I attend, whether in our office or theirs. A recent visit by Mogens Bay, Chairman and CEO of Valmont (VMI), a diversified industrial company, is a case in point. We have had a modest sized investment in Valmont since 2009. We have since about doubled our money.


    We think Valmont’s towers business will benefit from increased spending by utilities on more efficient electricity transmission and is well-positioned to grow. This is because the Federal Energy Regulatory Commission, in order to reduce our country’s energy consumption, has granted utilities significant incentives to invest in transmission.

      


  • Ron Baron Second Quarter 2014 Shareholder Letter

    “This company could survive for a long time without its CEO. It couldn’t last through lunchtime without its welders.” Mogens Bay. Chairman and CEO. Valmont. May 2014.


    On average, three to four corporate management teams visit us every day. Management meetings provide us with context about businesses that we research and in which we invest. These meetings also enable us to ask questions about long-term strategies, growth opportunities, challenges and competitive advantages. As importantly, they give us a chance to qualitatively assess management talent and personalities. That may be what is most important of all and in keeping with our mission statement, “we invest in people.”

      


  • Baron Funds Comments on Amber Road Inc

    Amber Road, Inc. (AMBR), is in the Internet software & services sub-industry, where we have found a number of companies we like. We participated in Amber Road’s IPO in March 2014 and added to our position in May 2014. The company has a unique product: a proprietary database developed over the past decade that tracks the complex issues involved in international trade, including worldwide import/export controls, tariff rules, restricted party lists, and sailing schedules, in over 20 languages. It has a high quality customer base and subscription-based revenue model that provides transparency into the company’s financial health.


    From Baron Funds' Second Quarter 2014 Shareholder Letter.

      


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User Comments

Francesca turner
ReplyFrancesca turner - 6 months ago
why is illumina performing so badly and do you still own it?



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