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Baron Discovery Strategy

Symbol DISCOVER
S
Small-Cap Growth

Total Strategy Assets

$1.53 B

As of 09/30/2024

Inception date

10/31/2013

Performance

PerformanceAs of 09/30/2024

Portfolio or IndexQTDYTD1 Year3 Years5 Years10 YearsSince Inception 10/31/2013
Baron Discovery Strategy (Net)-9.49%23.18%-5.37%10.94%12.20%12.46%
Baron Discovery Strategy (Gross)-10.29%24.39%-4.44%12.04%13.23%13.42%
Russell 2000 Growth Index-13.22%27.66%-0.35%8.82%8.95%8.36%
Russell 3000 Index-20.63%35.19%10.29%15.26%12.83%12.94%

Performance InformationAs of 09/30/2024

Performance statistics3 Years5 Years10 Years
Standard Deviation (%)24.8325.6622.60
Sharpe Ratio-0.360.330.47
Alpha (%)-4.652.323.27
Beta1.021.001.01
R-Squared (%)89.3788.9386.60
Tracking Error (%)8.108.548.28
Information Ratio-0.620.250.39
Upside Capture (%)90.86102.83106.58
Downside Capture (%)107.2496.8196.18
Except for Standard Deviation and Sharpe Ratio, the performance based-characteristics above were calculated relative to the Baron Discovery Strategy's benchmark Russell 2000 Growth Index. Performance statistics for additional periods will be provided on request. Source FactSet: SPAR.

Portfolio Holdings & Characteristics

HoldingsAs of 11/30/2024

HoldingSector% of Net Assets
PAR Technology Corporation
PAR Technology Corporation (PAR) is a leading global provider of software, systems, and service solutions to the restaurant industry. Its cloud-based SaaS offering for point of sale, loyalty, ordering, and back office is purpose-built for enterprise restaurants.
PAR is building a cloud-based unified commerce platform for enterprise restaurants to improve operational efficiencies and customer satisfaction. Through acquisitions, PAR now has most of the key pieces of the restaurant tech stack in-house and is driving cross-sell and penetration across enterprise restaurants. The company has a multi-year opportunity to drive the secular shift among restaurant operators to cloud-based systems, with limited competition from incumbents. We think PAR can deliver 20% to 30% ARR growth for several years with strong operating leverage.
Information Technology3.3%
DraftKings Inc.
DraftKings Inc. (DKNG) is the leading mobile sportsbook and gaming operator in the U.S. Its products include daily fantasy sports, regulated internet casino gaming, and regulated online sports betting. DraftKings offers sports betting in 26 states and online casino gaming in five states.
As the market leader in internet casino gaming, DraftKings is well positioned to capitalize on the rapid growth of regulated sports betting and iGaming in the U.S. The company is demonstrating healthy profit margins in its most mature markets and remains focused on driving strong customer lifetime value. We believe DraftKings’s product and scale advantages will enable the company to maintain its leadership position in the years ahead.
Consumer Discretionary3.1%
Kratos Defense & Security Solutions, Inc.
Kratos Defense & Security Solutions, Inc. (KTOS) develops and fields transformative, affordable technology, platforms, and systems for U.S. national security-related customers, allies, and commercial enterprises.
Kratos specializes in unmanned systems, satellite communications, cybersecurity/warfare, missile defense, training, and combat systems. Kratos’ unmanned systems/drone business offers technologically disruptive solutions that enable cost-effective upgrades of U.S. military technology. Within government services, the majority of revenue comes from high growth spaces, including small jet engine, microwave electronics, and missile defense businesses. We expect growth to accelerate as Kratos wins key government contracts across the business due to its unique, low-cost offerings.
Industrials3.1%
CyberArk Software Ltd.
CyberArk Software Ltd. (CYBR) is an identity-based security software provider focused on privileged access management (PAM). The PAM platform prevents against theft of the credentials of privileged accounts (such as IT administrators) and restricts access to critical resources. 
CyberArk is a recognized market leader with more than 25% share in PAM and deployments in over half of the Fortune 500. The company is leveraging its foothold in PAM across its 8,000 clients to expand into adjacent markets such as single sign-on, multifactor authentication, secrets management, and endpoint privilege management. New product categories, which are doubling on a yearly basis, account for roughly 40% of revenue. Transition to a subscription-based model should lead to revenue reacceleration, strong free cash flow margins, and increased customer lifetime value. 
Information Technology3.0%
Liberty Media Corporation - Liberty Live
Liberty Media Corporation - Liberty Live (LLYVK) consists of Liberty Media Corporation's 30% interest in Live Nation Entertainment, Inc., the world's largest live entertainment company, producing, selling, and promoting concerts, and connecting brands to music.
Live Nation is the dominant player in an industry with solid long-term demand trends. The company has significant opportunities for capital reinvestment. Its investment in new owned and operated venues drives higher concert segment margins relative to shows held at third-party venues, largely due to Live Nation's control of the profitable food and beverage business. As Live Nation's mix shift to owned venues increases, we believe the resulting margin improvement will produce low-double-digit growth in adjusted operating income over the long term.
Communication Services3.0%
Guidewire Software, Inc.
Guidewire Software, Inc. (GWRE) is a leading provider of core systems software to the global P&C insurance industry.
Guidewire is a small player in a vast addressable market and has been benefiting from the inevitable need for P&C insurers to upgrade 30-year-old systems. The company offers best-in-class functionality, as evidenced by its growing installed base and near-100% retention rates. The company has passed the midpoint of its cloud transition, and we expect to see accelerating revenue, expanding margins, and improving FCF over the next several years. We believe that recent M&A in the vertical software space supports a meaningful value creation opportunity for shareholders.
Information Technology2.8%
Clearwater Analytics Holdings, Inc.
Clearwater Analytics Holdings, Inc. (CWAN) is a cloud-based software solution providing portfolio accounting/reporting, compliance monitoring, performance tracking, and risk analytics for insurers, investment managers, corporations, and other institutional investors.
We believe Clearwater has a large market opportunity with the possibility of compounding revenue at a high-teens to 20%-plus rate for several years. Its cloud-based multi-tenant platform should continue to take share from legacy on-premise, service-heavy solutions or homegrown systems as companies increasingly shift operations to the cloud. Clearwater also benefits from powerful network effects driven by its unique data model and high client satisfaction. Its efficient business model should help the company reach a 40%-plus adjusted EBITDA margin over time.
Information Technology2.7%
Masimo Corporation
Masimo Corporation (MASI) is a global medical device company that manufactures and sells a variety of non-invasive patient monitoring technologies, including devices measuring pulse oximetry.
Masimo has been gaining market share as clinical studies have demonstrated that the company’s proprietary monitoring technology is superior to competitor products. Masimo's razor and blades business model generates a recurring revenue stream from the sale of disposable fingertip sensors. The company operates in a core market worth $9 billion for hospital monitoring and automation, with newly entered markets like hearables, wearables, and telemonitoring expanding Masimo’s total addressable market to $171 billion.
Health Care2.7%
SentinelOne, Inc.
SentinelOne, Inc. (S) is a cybersecurity platform focused on agent-based endpoint protection (securing laptops, mobile devices, and virtual machines), cloud security (protecting containerized workloads at runtime), and security analytics.
SentinelOne was built with AI from inception to facilitate the protection of enterprises across endpoints, identities, and clouds and quickly detect anomalies and potential hacks. We believe it has a long runway for growth driven by 1) market share capture from legacy endpoint vendors struggling to compete against SentinelOne's AI-enabled platform, 2) an ongoing IT infrastructure shift to the cloud driving demand for cloud application protection, and 3) cybersecurity vendor consolidation favoring platforms with comprehensive security portfolios over point solutions. 
Information Technology2.6%
Dayforce, Inc.
Dayforce, Inc. (DAY) is a global human capital management (HCM) software company.
Dayforce’s total addressable market is the roughly $20 billion market for HCM and payroll applications. Dayforce benefits from high barriers to entry due to the more than 13,000 local tax codes and other complex, constantly changing regulations global employers must follow. We believe that Dayforce’s flagship cloud-based HCM platform, its largest and fastest-growing business unit, will continue to take share. In addition, we believe Dayforce will benefit from the rollout of on-demand pay and continued globalization of its footprint.
Industrials2.6%
Total
Total
28.8%
Top Ten Holdings, Portfolio Holdings, and Sector Breakdown based on net assets. Positions smaller than 0.05% round to 0.0%. Portfolio holdings may change over time.
Portfolio holdings are subject to change. Current and future portfolio holdings are subject to risk.

Contributors / DetractorsQuarterly as of 09/30/2024

Top ContributorsAverage WeightContribution
CareDx, Inc.2.46%1.72%
Axon Enterprise, Inc.3.44%1.23%
Tempus AI, Inc.1.20%1.12%
Exact Sciences Corporation1.87%0.94%
Veracyte, Inc.1.69%0.87%
Source:  FactSet PA.  Based on the gross performance results of the representative account. 

GICS Sector BreakdownAs of 11/30/2024

Sector

Information Technology

32.6%

Industrials

20.6%

Health Care

18.9%

Consumer Discretionary

10.4%

Cash & Cash Equivalents

6.5%

Communication Services

4.8%

Financials

3.6%

Real Estate

2.6%

Sub-Industry

11/30/2024
Application Software13.30%
Life Sciences Tools & Services10.00%
Systems Software9.60%
Aerospace & Defense8.20%
Health Care Equipment7.50%
Electronic Equipment & Instruments5.90%
Industrial Machinery & Supplies & Components 4.40%
Casinos & Gaming4.00%
Movies & Entertainment3.90%
Human Resource & Employment Services2.60%
Restaurants2.40%
Trading Companies & Distributors2.20%
Property & Casualty Insurance2.20%
Semiconductors2.10%
Home Improvement Retail2.00%
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Application Software13.30%
Life Sciences Tools & Services10.00%
Systems Software9.60%
Aerospace & Defense8.20%
Health Care Equipment7.50%
Electronic Equipment & Instruments5.90%
Industrial Machinery & Supplies & Components 4.40%
Casinos & Gaming4.00%
Movies & Entertainment3.90%
Human Resource & Employment Services2.60%
Restaurants2.40%
Trading Companies & Distributors2.20%
Property & Casualty Insurance2.20%
Semiconductors2.10%
Home Improvement Retail2.00%
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Portfolio CharacteristicsAs of 06/30/2024

DescriptionBaron Discovery StrategyRussell 2000 Growth Index
Inception DateOctober 31, 2013
# of Issuers / % of Net Assets60 / 97.2%
Turnover (3 Year Average)38.83%
Active Share96.4%
Median Market Cap$5.42 billion$1.20 billion
Weighted Average Market Cap$6.68 billion$5.97 billion
EPS Growth (3-5 year forecast)23.8%17.2%
Price/Earnings Ratio (trailing 12-month)38.620.6
Price/Book Ratio3.83.6
Price/Sales Ratio3.71.7
Total Strategy Assets$1.53 billion
Price/Book Ratio and Price/Sales Ratio are calculated using the Weighted Harmonic Average. Source: FactSet PA. Internal valuation metrics may differ.