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Baron Funds' Top 5 Buys in the 4th Quarter

- By James Li

Baron Funds, founded by Ron Baron (Trades, Portfolio), disclosed last week its top five new positions for fourth-quarter 2018 were New Oriental Education & Technology Group Inc. (EDU), YY Inc. (YY), Lowe's Companies Inc. (LOW), Guardant Health Inc. (GH) and D.R. Horton Inc. (DHI).


The fund invests primarily in small and mid-size growth companies through a value-oriented purchase discipline. Baron seeks companies that have open-ended growth opportunities, offer defensive niches and are trading at attractive prices.

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According to current portfolio statistics, Baron Funds' top five sectors in terms of portfolio weight are technology, consumer discretionary, financial services, health care and real estate. The equity portfolio contains 369 positions as of quarter-end, of which 31 are new holdings.

New Oriental Education

The fund invested in 504,486 shares of New Oriental Education for an average price of $57.57 per share, giving the position 0.14% equity portfolio weight.

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New Oriental Education provides a wide range of private educational services in China, including overseas and domestic test preparation courses, after-school tutoring, primary and secondary school training and educational software. The company's profitability ranks 8 out of 10 primarily due to consistent revenue growth and returns that are outperforming over three-quarters of global competitors. Despite this, GuruFocus lists several warning signs, which include declining profit margins and a weak Piotroski F-score of 3. Additionally, the company's four-star business predictability rank is on watch due to a slight deceleration in EBITDA per share growth over the past 12 months.

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Chris Davis (Trades, Portfolio) and Jana Partners (Trades, Portfolio) also bought shares of New Oriental Education during the quarter.

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YY

The fund invested in 471,6334 shares of YY for an average price of $64.99 per share, giving the position 0.14% equity portfolio space.

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YY provides a wide range of group activities through websites like YY.com and Duowen.com. GuruFocus ranks the company's financial strength 9 out of 10: even though the Piotroski F-score ranks a poor 3 out of 9, YY has robust interest coverage and an Altman Z-score that suggests low financial distress.

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Sarah Ketterer (Trades, Portfolio) and Jim Simons (Trades, Portfolio)' Renaissance Technologies also bought shares of YY during the quarter.

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Lowe's

The fund invested in 250,863 shares of Lowe's for an average price of $95.77 per share, giving the position 0.12% equity portfolio space.

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The Mooresville, North Carolina-based company offers products and services for home decorating, maintenance, repair and remodeling. GuruFocus ranks the company's profitability 7 out of 10 on several positive investing signs, which include expanding profit margins and consistent revenue growth. Lowe's return on assets of 10% is outperforming 85% of global home improvement stores.

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Pershing Square fund manager Bill Ackman (Trades, Portfolio) also bought shares of Lowe's during the quarter.

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Guardant Health

The fund invested in 564,998 shares of Guardant Health for an average price of $36.87 per share, giving the position 0.11% equity portfolio space.

Guardant Health focuses on helping conquer cancer globally through blood tests, data sets and analytics. The company had its initial public offering on Oct. 4: according to CNBC columnist Michelle Fox, CEO Helmy Eltoukhy said Guardant's liquid biopsy expects to "match [late-stage cancer patients] with the most effective therapies." The blood tests allow the company to match "tiny signals" in blood with the best possible therapy treatment.

D.R. Horton

The fund invested in 550,453 shares of D.R. Horton for an average price of $36.31 per share, giving the position 0.10% equity portfolio space.

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D.R. Horton builds single-family, detached homes through brands like D.R. Horton, America's Builder, Emerald Homes and Breland Homes. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include expanding profit margins and a strong Piotroski F-score of 7. Additionally, D.R. Horton's returns on equity are outperforming 81% of global residential construction companies.

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Disclosure: No positions.

Read more here:

  • Bill Ackman's Pershing Square Discloses 2 New Positions for 4th Quarter
  • Larry Robbins Plunges Into Dan Loeb's Cigna, Buys 3 in 4th Quarter
  • David Rolfe's Top 5 Position Boosts During 4th Quarter


This article first appeared on GuruFocus.