Baron Funds, an investment management company, released its “Baron Small Cap Fund” second-quarter 2023 investor letter. A copy of the same can be downloaded here. The fund was 6.49% (Institutional Shares) up in the second quarter and 16.54% up for the first half of the year. This quarter, the Fund underperformed the broader S&P 500 Index, as larger stocks beat smaller ones while, year-to-date the fund’s performance is comparable to the S&P 500 Index. The fund performed similarly to the Russell 2000 Growth Index (the Benchmark) during the quarter, and year-to-date the fund returned nearly 300 points ahead of the benchmark. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Baron Small Cap Fund highlighted stocks like TransDigm Group Incorporated (NYSE:TDG) in the second quarter 2023 investor letter. Headquartered in Cleveland, Ohio, TransDigm Group Incorporated (NYSE:TDG) is an aircraft components manufacturer. On August 30, 2023, TransDigm Group Incorporated (NYSE:TDG) stock closed at $902.74 per share. One-month return of TransDigm Group Incorporated (NYSE:TDG) was 0.80%, and its shares gained 49.11% of their value over the last 52 weeks. TransDigm Group Incorporated (NYSE:TDG) has a market capitalization of $49.816 billion.
Baron Small Cap Fund made the following comment about TransDigm Group Incorporated (NYSE:TDG) in its second quarter 2023 investor letter:
“We have had some extraordinary winners over time. For instance, we bought DexCom, Inc. at a $950 million market cap in 2012, and it is now valued at $50 billion (the stock has appreciated 41% annually since the Fund’s initial purchase). TransDigm Group Incorporated (NYSE:TDG) has grown from $1.1 billion at purchase to $49 billion presently (and the stock has appreciated 29% annually since the Fund’s initial purchase 17 years ago). IDEXX Laboratories, Inc. has gone from $2 billion at purchase to $42 billion over almost 15 years and the stock has appreciated 26% annually during that time frame. The Trade Desk is now valued at $38 billion and was $433 million when we first purchased shares over 6 years ago. The stock has appreciated almost 60% annually since our initial purchase. Pretty amazing. All four stocks have been solid performers this year, contributing nicely to the Fund’s returns.
Since we run a small-cap fund but want to hold on to these great investments as they continue to compound and perform, we reduce the positions sizes over the holding period so that the overall market capitalization of the Fund is palatable. For each of the four stocks mentioned above, we presently own 11% or less of our peak positions. We take the proceeds from the trimming of these positions to fund new small-cap investments, with the hopes of somehow replicating these results.”
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TransDigm Group Incorporated (NYSE:TDG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held TransDigm Group Incorporated (NYSE:TDG) at the end of second quarter which was 67 in the previous quarter.
We discussed TransDigm Group Incorporated (NYSE:TDG) in another article and shared the list of most undervalued large cap stocks to buy according to Wall Street analysts. In addition, please check out our hedge fund investor letters Q2 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.
