Baron Small Cap (BSCFX)

Cliff Greenberg, manager of the Baron Small Cap fund (BSCFX) has been buying stocks of high-quality companies with growth potential at greatly reduced prices. Short-term earnings have remained flat, but long term outlook is optimistic. According to Greenberg, the markets won’t bounce back until “the world rights itself.” He is unwilling (or unable) to make a prediction of when this will be.

One of the stocks that Baron Small Cap (BSCFX) has been purchasing is Covance (CVD) which is currently trading for $39.21, with a 52 week high of $99.08. The company’s 52 week low was $31.43. Covance (CVD) provides research services for pharmaceutical companies and Greenberg expects the big drug companies to increase the amount of research services that they outsource. This should lead to increased revenues for Covance (CVD) and a rebound in stock prices.

The chart above shows how Baron Small Cap (BSCFX) ten year annualized return of 4.15% compares to has compared to the S&P 500 over the last ten years, even after suffering through its worst year in 2008.

Baron Small Cap Fund (BSCFX) Stock Holdings

Baron Small Cap Fund (BSCFX) has been managed by Cliff Greenberg since its inception in September 1997. Greenberg says he looks for “one-off ideas.” Basically, he looks at individual companies separately instead of investing by index or sector trends. The approach has been working as Baron Small Cap Fund (BSCFX) has continuously beaten the market.

Generally, Baron Small Cap Fund (BSCFX) avoids technology and bio-tech stocks because future profitability is difficult to determine. He prefers to stay within consumer businesses such as housing and education as their income is more transparent and predictable. He typically holds the investments in the portfolio for three years or more.

The top 25 holdings for Baron Small Cap Fund (BSCFX) as of January 1, 2009 are shown below:

STRA Strayer Education, Inc. Net Asset Value 3.07%
BLUD Immucor, Inc. Net Asset Value 2.72%
TDGTransdigm Group, Inc. Net Asset Value 2.64%
CVA Covanta Holding Corporation Net Asset Value 2.62%
FLIR FLIR Systems, Inc. Net Asset Value 2.56%
CLH Clean Harbors, Inc. Net Asset Value 2.42%
PENN Penn National Gaming Net Asset Value 2.40%
SBAC SBA Communications Corporation Net Asset Value 2.22%
EQIX Equinix, Inc. Net Asset Value 2.16%
CPLA Capella Education Company Net Asset Value 2.10%
AMT American Tower Corporation A Net Asset Value 2.10%
DLR Digital Realty Trust, Inc. Net Asset Value 1.96%
MASI Masimo Corporation Net Asset Value 1.88%
ACM AECOM Technology Corporation Net Asset Value 1.76%
EXP Eagle Materials, Inc. Net Asset Value 1.76%
ICON Iconix Brand Group, Inc. Net Asset Value 1.75%
AVAV AeroVironment, Inc. Net Asset Value 1.67%
HURN Huron Consulting Group, Inc. Net Asset Value 1.57%
RBA Ritchie Bros. Auctioneers, Inc. Net Asset Value 1.53%
IT Gartner, Inc. A Net Asset Value 1.49%
HEI.A Heico Corporation A Net Asset Value 1.48%
MVL Marvel Enterprises, Inc. Net Asset Value 1.47%
IDXX Idexx Laboratories Net Asset Value 1.46%
ATU Actuant Corporation A Net Asset Value 1.45%
DTSI DTS, Inc. 1.42%

These 25 stocks account for 49.66% of the holdings in Baron Small Cap Fund (BSCFX).