Baron Funds, an investment management company, released its “Baron Small Cap Fund” third-quarter 2023 investor letter. A copy of the same can be downloaded here. The fund had a fine quarter and is having a good year. The fund was down 3.11% (Institutional Shares) in the third quarter, in a weak market and year-to-date the fund was up 12.92%. The Fund outperformed the Russell 2000 Growth Index, which fell 7.32% in the quarter and is only up 5.24% year-to-date. The Fund slightly outperformed the S&P 500 Index in the quarter but is trailing year-to-date. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Small Cap Fund highlighted stocks like Fox Factory Holding Corp. (NASDAQ:FOXF) in the third quarter 2023 investor letter. Headquartered in Duluth, Georgia, Fox Factory Holding Corp. (NASDAQ:FOXF) is a ride dynamics products manufacturer. On November 27, 2023, Fox Factory Holding Corp. (NASDAQ:FOXF) stock closed at $62.26 per share. One-month return of Fox Factory Holding Corp. (NASDAQ:FOXF) was -23.58%, and its shares lost 39.34% of their value over the last 52 weeks. Fox Factory Holding Corp. (NASDAQ:FOXF) has a market capitalization of $2.639 billion.
Baron Small Cap Fund made the following comment about Fox Factory Holding Corp. (NASDAQ:FOXF) in its Q3 2023 investor letter:
“We re-initiated a position in former Fund investment Fox Factory Holding Corp. (NASDAQ:FOXF). Fox Factory is a manufacturer of premium components for high-end bicycles and powered vehicles (side-by-sides, on-road trucks with off-road capabilities, all-terrain vehicles, etc.). The business has a long legacy as an innovator and market leader within its various suspension categories, and its high performance products generate a loyal enthusiastic customer base. The company has relationships with bike original equipment manufacturers (OEMs) such as Giant, Trek, and Specialized; and truck and off-road OEMs such as Ford, Toyota, Polaris, BRP, and Honda. Fox attempts to keep its business balanced between OEMs and aftermarket products. While end-products are discretionary purchases, Fox sells into the highest end of the market where customers consider these products essential to their lifestyle.
We have been impressed with management’s ability to find new opportunities for growth via adjacent market penetration, M&A, and new products that remain synergistic with the company’s vision and brand. Fox’s success in the off-road truck market and its early development of a new Aftermarket Applications Group are examples. We believe legacy auto OEMs are incentivized to increase volumes of their premium off-road derivatives (e.g., the Ford Raptor). These derivatives currently represent just a low to mid- to single-digit share of OEM production, but they are highly profitable vehicles. Fox shocks are firmly entrenched in many of these platforms and through existing customer expansion and new customer wins, Fox’s auto OEM business has a durable growth runway. Additionally, Fox has established itself as a leader in the pickup truck upfitting (premium re-styling) business. Upfitting is a secularly growing category that has customer and product overlap with Fox’s suspension systems. By moving into this market, Fox is able to capture more revenue from the sale of its shocks and other vertically integrated components. Over the long term, the combination of organically growing end-markets, management’s proven M&A track record, and the company’s competitive positioning give us confidence that Fox can compound earnings per share at high rates. Fox’s business has been greatly affected by COVID, both increasing demand at first but now dealing with an inventory headwind. We believe that the company will soon revert to more normal growth, and we believe the stock trades cheaply, so we view this to be a good entry point.”
Pixabay/Public Domain
Fox Factory Holding Corp. (NASDAQ:FOXF) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Fox Factory Holding Corp. (NASDAQ:FOXF) at the end of third quarter which was 18 in the previous quarter.
We discussed Fox Factory Holding Corp. (NASDAQ:FOXF) in another article and shared ClearBridge Investments’ views on the company. In addition, please check out our hedge fund investor letters Q3 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.
