Ron Baron (Trades, Portfolio), leader of New York-based Baron Capital Management, released his first-quarter portfolio this week, listing 58 new positions.
According to the firm’s website, Baron, who manages the Baron Asset Fund as well as the Growth and Partners Funds, invests for the long term in growth companies that have open-ended opportunities and competitive advantages.
Among the companies that met these criteria in the most recent quarter were PagSeguro Digital Ltd. (PAGS, Financial), Hudson Ltd. (HUD, Financial), Momo Inc. (MOMO, Financial), Waters Corp. (WAT, Financial) and Americold Realty Trust (COLD, Financial).
PagSeguro Digital
Baron invested in 2.56 million shares of PagSeguro for an average price of $32.10 per share, giving it 0.45% portfolio space.
The Brazilian payment services company, which went public in January, has a market cap of $12.59 billion; its shares were trading around $32.66 on Thursday with a price-earnings ratio of 81.65, a price-book ratio of 32.56 and a price-sales ratio of 11.19.
Since its initial public offering, GuruFocus estimates the stock has gained approximately 12%.
PagSeguro’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. With no debt and a high Altman Z-Score of 7.09, the company is financially stable. In addition, it has a strong Piotroski F-Score of 7 and an operating margin that outperforms 87% of competitors.
Baron holds 0.67% of the company’s outstanding shares.
Hudson
The investor purchased 2.78 million shares of Hudson for an average price of $15.99 per share, expanding the portfolio 0.2%.
The New Jersey-based airport convenience store chain, which made its market debut in February, has a market cap of $1.56 billion; its shares were trading around $17.74 on Thursday with a forward price-earnings ratio of 21.51, a price-book ratio of 2.93 and a price-sales ratio of 1.28.
According to the price chart below, the stock has risen approximately 1% since its IPO.
As the company has a poor level of interest coverage, GuruFocus rated Hudson’s financial strength 4 out of 10. Its profitability and growth did not fare much better, scoring a 3 of 10 rating, due, in part, to its operating margin, which underperforms 59% of competitors.
With his purchase of 3.01% of outstanding shares, Baron became the company’s largest guru shareholder. Steven Cohen (Trades, Portfolio) also holds the stock.
Momo
Having previously closed a position in Momo in the third quarter of 2017, Baron established a new 908,466-share holding for an average price of $31.61 per share. The trade had an impact of 0.16% on the portfolio.
The Chinese social media company has a market cap of $7.53 billion; its shares were trading around $37.81 on Thursday with a price-earnings ratio of 22.55, a price-book ratio of 6.79 and a price-sales ratio of 5.52.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading higher than its fair value.
Bolstered by no debt and a high Altman Z-Score, Momo’s financial strength was rated a perfect 10 by GuruFocus. Its Beneish M-Score, however, suggests the company may manipulate its financial statements. Its profitability and growth did not fare as well, receiving a 5 out of 10 rating. While its operating margin outperforms 89% of competitors, its Piotroski F-Score is a moderate 6.
With 1.6% of outstanding shares, Jim Simons (Trades, Portfolio) is the company’s largest guru shareholder. Sarah Ketterer (Trades, Portfolio) and John Hussman (Trades, Portfolio) are also shareholders.
Waters
Baron bought 168,468 shares of Waters for an average price of $206.81 per share, giving it 0.15% portfolio space.
The Milford, Massachusetts-based company, which manufactures analytical laboratory instruments, has a market cap of $15.25 billion; its shares were trading around $194.66 on Thursday with a price-earnings ratio of 648.87, a price-book ratio of 7.21 and a price-sales ratio of 6.68.
The Peter Lynch chart below shows the stocks is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Waters’ financial strength 7 out of 10, boosted by its comfortable level of interest coverage and stable Altman Z-Score of 7.36. As the company’s operating margin is expanding, its profitability and growth was rated 8 of 10. It also has a high Piotroski F-Score of 7 and a perfect business predictability rating of five stars (out of five).
Of the gurus invested in Waters, Simons has the largest holding with 1.82% of outstanding shares. Other guru shareholders are Ruane Cunniff (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Americold
The guru invested in 1.53 million shares of Americold Realty Trust, which went public in January, for an average price of $18.08 per share, expanding the portfolio 0.13%.
The Atlanta-based real estate investment trust, which owns and operates temperature-controlled warehouses, has a market cap of $3.08 billion; its shares were trading around $21.64 on Thursday with a price-sales ratio of 7.20.
According to the chart below, the stock has climbed an estimated 22% since its IPO.
As a result of a low level of interest coverage and a low Altman Z-Score of 0.80, which indicates the possibility of bankruptcy, GuruFocus rated Americold’s financial strength 3 out of 10. Its profitability and growth was rated 5 of 10. While its operating margin is showing signs of expansion, which is good, it still underperforms 90% of competitors.
Baron holds 1.07% of the company’s outstanding shares.
Other trades
Baron also established positions in Orion Engineered Carbons SA (OEC, Financial), Planet Fitness Inc. (PLNT, Financial), Syneos Health Inc. (SYNH, Financial), Eagle Materials Inc. (EXP, Financial) and Activision Blizzard Inc. (ATVI, Financial), among others, during the quarter.
The guru’s portfolio, which is composed of 352 holdings, is largely invested in the consumer cyclical and technology sectors. According to GuruFocus, the Baron Partners Fund outperformed the S&P 500 index in 2017 with a return of 31.54%. The benchmark posted a 21.71% return.
Disclosure: No positions.
