NEW YORK (
TheStreet) -- Ron Baron ranks as one of the top growth managers. During the past 15 years, his
(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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
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.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
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.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV