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James Li
James Li
Articles (886)  | Author's Website |

Baron Funds’ Top 5 Buys in the 2nd Quarter

Fund founder Ron Baron remains invested despite high market volatility

August 20, 2019 | About:

Baron Funds, which was founded by Ron Baron (Trades, Portfolio), disclosed last week its top five buys for the second quarter were Clarivate Analytics PLC (NYSE:CCC), Trex Co. Inc. (NYSE:TREX), Iridium Communications Inc. (NASDAQ:IRDM), Endava PLC (NYSE:DAVA) and Copa Holdings SA (NYSE:CPA).

Baron said in a CNBC “Squawk Box” interview Tuesday morning that he “invests consistently over the long term,” even during times of high market volatility. The Dow Jones Industrial Average closed at 25,962.44, down 173.35 points from Monday’s close of 26,135.79, ending a three-day rebound from last Wednesday’s 800-point nosedive.

The fund invests primarily in small and mid-size companies that have open-ended growth opportunities and defensible niches. Baron applies a bottom-up approach and attempts to purchase companies at attractive prices.

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As of quarter-end, the fund’s $24.94 billion equity portfolio contains 361 stocks, of which 29 represent new holdings. The portfolio’s top three sectors in terms of weight are technology, consumer cyclical and financial services, with weights of 23.43%, 19.88% and 15.36%.

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Clarivate

The fund purchased 4 million shares of Clarivate, giving the stake 0.25% equity portfolio weight. Shares averaged $14.01 during the period between May 14 and June 30.

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Clarivate completed its merger with Churchill Capital Group on May 13; the combined company started trading on the New York Stock Exchange on May 14. The company said on Aug. 7 that net revenues for the six months ending June 30 declined 0.8% from the prior-year period, driven primarily by a 10.2% decline in Transactional revenues.

Trex

The fund added 760,669 shares of Trex, increasing the position 38.55%. Shares averaged $67.87 during the quarter.

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The Winchester, Virginia-based company manufactures wooden alternative-decking products in the decking, railing, porch, fencing, trim, steel deck framing and outdoor lighting categories. GuruFocus ranks Trex’s financial strength 8.2 out of 10 on several positive signs, which include robust interest coverage, a strong Altman Z-score of 23.77 and debt ratios that outperform over 83% of global competitors.

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Iridium

The fund added 2,274,335 shares of Iridium, increasing the stake 24.4%. Shares averaged $24.88 during the quarter.

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The McLean, Virginia-based company offers voice and data communication products and services to businesses and U.S. government agencies. GuruFocus ranks Iridium’s financial strength 3.8 out of 10: Although the company’s Piotroski F-score ranks a solid 5 out of 9, its debt ratios and interest coverage are underperforming over 66% of global competitors.

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Endava

The fund added 1,011,684 shares of Endava, increasing the stake 262.06%. Shares averaged $33.75 during the quarter.

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U.K.-based Endava provides next-generation technology services that aim to increase responsibility and efficiency within enterprises. According to GuruFocus data, Endava’s Altman Z-score, which is a robust 21.52, and cash-to-debt ratio, which outperforms 73.7% of global competitors, suggest strong financial strength.

Copa Holdings

The fund added 366,623 shares of Copa Holdings, increasing the holding 89.5%. Shares averaged $88.59 during the quarter.

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The Panama-based airline offers domestic and international air transportation for passengers, cargo and mail from its Panama City hub through Copa Airlines and Copa Columbia. GuruFocus ranks Copa’s financial strength 5.2 out of 10: Although the company’s equity-to-asset ratio outperforms 89.06% of global competitors, it has a weak Piotroski F-score of 3 and a poor Altman Z-score of 2.22.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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