Baron Funds, an investment management company, released its “Baron Growth Fund” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the fund gained 7.88% (Institutional Shares) which exceeded the primary benchmark the Russell 2000 Growth Index’s 6.07% return. It also outperformed the S&P 500 Index’s 7.50% return. The sudden bank failures raised concerns about the health of the US regional banking system. The fund doesn’t own any investments in banks for the past 11 years. The company is focused on investing in businesses with durable competitive advantages. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Growth Fund highlighted stocks like Kinsale Capital Group, Inc. (NYSE:KNSL) in the first quarter 2023 investor letter. Headquartered in Richmond, Virginia, Kinsale Capital Group, Inc. (NYSE:KNSL) is an insurance company. On June 12, 2023, Kinsale Capital Group, Inc. (NYSE:KNSL) stock closed at $348.77 per share. One-month return of Kinsale Capital Group, Inc. (NYSE:KNSL) was 4.62%, and its shares gained 60.00% of their value over the last 52 weeks. Kinsale Capital Group, Inc. (NYSE:KNSL) has a market capitalization of $8.076 billion.
Baron Growth Fund made the following comment about Kinsale Capital Group, Inc. (NYSE:KNSL) in its first quarter 2023 investor letter:
“While we don’t own banks or other interest rate sensitive securities, we have invested 39% of Fund assets in securities that we consider to be Financials. Within this cohort, 52% of our investments are technology-enabled market data vendors. The remaining 48% of our Financials exposure includes differentiated insurers or unique advisory businesses. We believe that they have carved out unique and sustainable competitive advantages, such as Primerica, Inc.’s extensive distribution network or Arch Capital Group Ltd.’s best-in-class underwriting discipline. We also believe that all are benefiting from compelling secular trends, such as Kinsale Capital Group, Inc. (NYSE:KNSL)’s exposure to dramatic growth in the Excess & Surplus insurance market.
While we consider these investments Financials, their success is not dependent on interest rates and they do not assume any credit risk. All share the attractive characteristics that we value in our investments, which include large addressable markets, positive secular trends, sustainable competitive advantages, attractive business models underpinned by recurring revenue, annual price increases, robust free-cash-flow generation, and best-in-class management teams.
We hold investments for the long term. As of March 31, 2023, our weighted average holding period was 15.3 years. This is dramatically longer than most other small-cap growth funds, which, according to Morningstar, turn over about 76% of their portfolios annually based on an average for the last five years. The portfolio’s 10 largest positions have a weighted average holding period of 17.0 years, ranging from a 6.3-year investment in Kinsale Capital Group, Inc. to investments in Choice Hotels International, Inc. and Vail Resorts, Inc. that now both exceed 26 years. We have held 23 investments, representing 77.4% of the Fund’s net assets, for more than 10 years. We have held 20 investments, representing 21.7% of the Fund’s net assets, for less than 10 years.”
Kinsale Capital Group, Inc. (NYSE:KNSL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Kinsale Capital Group, Inc. (NYSE:KNSL) at the end of first quarter 2023 which was 21 in the previous quarter.
We discussed Kinsale Capital Group, Inc. (NYSE:KNSL) in another article and shared Baron Funds’ views on the company. In addition, please check out our hedge fund investor letters Q1 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
