Ron Baron of Baron Funds was interviewed by Morningstar lately. The interview was centered around Baron Growth Fund (BGRFX), which invests in small cap (around $2.6 billion market cap) growth companies. The fund outperformed Russell 2000 Growth Index if you go farther enough in the history. In another word, it failed to match up the benchmark in short and intermediate terms.
The short term or even extended periods of underperformance are curses for fund managers. Even though individuals may not do any better than the professionals, we have higher expectation for the fund managers and especially for the Investment Gurus. At GuruFocus we have seen our users are quite unforgiving towards the underperformance of so called “gurus”. But the truth is, underperformance could happen to anybody, seasoned investment managers included. There is only one Warren Buffett in the world.
In the interview, Ron Baron acknowledged the fact of underperformance, but he also had a good defense. Read the interview for details.
His longer term, Baron Partners Fund, actually did beat S&P 500 in the past 5, 10, and 15 years. GuruFocus uses Partners Fund to represents Ron Baron’s long term performance and it can be found here.
Back to the Morningstar interview, I found his answer on proprietary education providers is probably of particular use to our viewers. Here is an excerpt:
Ron Baron also touched on a few other very important aspects in investing, you are better served to read the complete interview.
Also check out:
The short term or even extended periods of underperformance are curses for fund managers. Even though individuals may not do any better than the professionals, we have higher expectation for the fund managers and especially for the Investment Gurus. At GuruFocus we have seen our users are quite unforgiving towards the underperformance of so called “gurus”. But the truth is, underperformance could happen to anybody, seasoned investment managers included. There is only one Warren Buffett in the world.
In the interview, Ron Baron acknowledged the fact of underperformance, but he also had a good defense. Read the interview for details.
His longer term, Baron Partners Fund, actually did beat S&P 500 in the past 5, 10, and 15 years. GuruFocus uses Partners Fund to represents Ron Baron’s long term performance and it can be found here.
Back to the Morningstar interview, I found his answer on proprietary education providers is probably of particular use to our viewers. Here is an excerpt:
You have been a successful, long-term investor in many for-profit educational firms, yet they seem to constantly draw regulatory and public scrutiny. How do you view these complaints, and what factors help you get comfortable with the firms despite these issues?
We believe Baron Growth's for-profit education investments, DeVry (DV, Financial) and Strayer Education (STRA, Financial), and Anhanguera Educacional Participacoes, offer their students affordable, high-quality education. Those institutions also place their students in well-paying jobs including those as engineers, nurses, accountants, and IT professionals upon graduation from their colleges, business schools, and nursing programs. DeVry's Caribbean-based Ross Medical School graduates more primary-care doctors and more African-American doctors than any medical school in the world. DeVry is a leader in granting degrees to Hispanic Americans in the computer sciences. Its veterinary school graduates are highly regarded.
Many students who attend DeVry University are working adults, minorities, and the children of immigrants who are often the first in their families to attend college. Those individuals often have not been well served by more selective, expensive private institutions. The $64,000 tuition cost of DeVry's four-year baccalaureate degree program seems reasonable to us relative to the costs of taxpayer-subsidized private and public universities.
Strayer Education's students' tuitions are often subsidized by the corporations which employ its students. Those businesses clearly find value in the education their employees obtain from Strayer.
In Brazil, children of well-to-do parents attend a few elite colleges at no cost. Children of families aspiring to reach middle-class status must pay to attend college. Anhanguera is a for-profit university with 250,000 students and is the largest university in Brazil. Anhanguera's graduates achieve results on standardized tests upon graduation similar to those of graduates of private colleges. Brazil's government, as part of its efforts to increase its middle class, is considering subsidies for Anhanguera's students.
America's state and community colleges, due to constraints on state budgets, are reducing enrollments and programs, creating even greater demand for proprietary education. Because proprietary institutions provide their graduates with an ability to obtain gainful employment, we think the growth prospects of these institutions remain favorable. We believe their stocks are inexpensive, and we continue to find these proprietary colleges attractive investments.
This has been the case since our firm first invested in DeVry in 1991. That investment has since increased in value more than 37 times. (Baron Growth first invested in DeVry at the fund's inception in December 1994 and has since earned a cumulative return of 930%.) We first invested in Strayer Education seven years ago and have since quadrupled our money. We invested in Anhanguera only recently, and this business, too, has since increased in value, though modestly, so far.
We believe the institutions in which Baron Growth has invested will benefit from increased government regulation. Questionable and inappropriate practices of certain less reputable education businesses will hopefully be eliminated and, as a result, criticisms of surviving institutions should be muted. Regulation that is fair and appropriate will give more credibility to well-run schools. In our opinion, more highly regulated institutions will then likely be more highly valued by investors.
Ron Baron also touched on a few other very important aspects in investing, you are better served to read the complete interview.
Also check out:
