This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

A Growth Fund Thriving in Volatile Markets

Stocks in this article: PENN UA DKS MTD UNFI WFM

NEW YORK ( TheStreet) -- Ron Baron ranks as one of the top growth managers. During the past 15 years, his Baron Growth (BGRFX) has returned 9.3% annually, outdoing its average mid growth peer by nearly 3 percentage points, according to Morningstar. What makes the record especially noteworthy is that the fund delivered strong returns while being less volatile than peers.

Racetrack owner Penn National is one of Baron's holdings.

Baron does particularly well in bear markets. The fund outdid its category by wide margins during the downturns of 2002 and 2008. When stocks collapsed this May, Baron Growth topped 97% of peers for the month.

The fund achieved the strong performance by following a distinctive strategy. Baron looks for companies that can deliver sustained earnings growth and strong returns on capital over long periods of time. Once the fund buys, it holds patiently. The average holding period for stocks in the portfolio is seven years. In contrast, competitors turn over their portfolios every year.

To find companies that can grow year after year, Baron looks for businesses with clear advantages. Many holdings have strong franchises that are protected by moats, factors that keep competitors from stealing market share. Such steady performers have enabled the fund to perform well in hard times.

Holdings include Penn National Gaming (PENN) , an operator of casinos and racetracks. The earnings have been reliable because the company has exclusive licenses to operate in smaller cities that are not near major gambling centers. Another holding is Under Armour (UA) , the maker of athletic clothing. The company has gained loyal customers by offering innovative products that absorb perspiration.

Ron Baron says that his fund aims to double its share price every five or six years. In an era of sluggish growth, the goal may seem ambitious. But in a recent shareholder letter, Baron argues that stocks can deliver solid returns because valuations have sunk sharply over the past decade.

During the 1990s bull market, the price/earnings ratio of the market peaked at 30, as investors expected the good times to last indefinitely. After the Internet bubble burst, optimism cooled. With valuations declining, the Standard & Poor's 500 returned 1.5% annually from 2000 through the first quarter of this year. The market performance was the worst in the country's history, trailing even the results of the Great Depression. By January 2012, the P/E had dipped to 12, well below the long-term average of 15.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs