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Baron Funds Comments on Berry Plastics Group

February 20, 2013 | About:
Holly LaFon

Holly LaFon

Our largest purchase in the quarter was Berry Plastics Group, Inc. (BERY), a successful 45 year old packaging company that went public this quarter. Berry is the second largest plastic packaging producer in the U.S., serving stable end-markets and long-standing blue chip customers. The company has a long tradition of delivering high quality customized solutions to its customers based on proprietary research and unique development and manufacturing technologies. It has grown organically and through acquisitions to over $5 billion in sales and is a market leader in each of its lines of business.

We are excited about Berry as an investment for three reasons. First, we expect growth to accelerate as the company introduces two new breakthrough products (a plastic cup for hot drinks and a plastic can that can substitute for metal and glass containers). Second, we expect substantial free cash flow to be generated, which will be used for debt reduction, thereby creating value for the equity. And third, we believe the trading multiple will expand to more properly reflect the company's strong franchise, superior growth profile and improving balance sheet. We think these three factors can lead to a double in the stock, although we cannot guarantee it.

From Baron Funds' fourth quarter commentary.

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