Ron Baron (Trades, Portfolio), leader of Baron Capital Management, is known for ignoring short-term market fluctuations, especially when he believes the fundamental reasons for purchasing the stock have not changed.
The guru’s New York-based firm implements a bottom-up research process to find small and mid-size growth companies with open-ended opportunities and significant competitive advantages to invest in for the long term while they are trading at attractive prices. Baron, who manages the Baron Asset Fund, the Baron Growth Fund and Baron Partners Fund, did just that when he bought the dip on Charles Schwab Corp. (SCHW, Financial) during Monday’s steep sell-off following the collapse of SVB Financial Group’s (SIVB, Financial) Silicon Valley Bank and Signature Bank (SBNY, Financial).
According to CNBC’s Becky Quick, the billionaire investor said he “modestly increased” his position in the financial services company, though he did not disclose exactly how much he purchased.
As a result of these developments, investors may be curious to know what capital markets stocks Baron likes currently. As of the end of the fourth quarter, the financial services sector had the second-largest representation in the guru’s $29.78 billion equity portfolio with a 20.64% weight.
According to the 13F filing for the three months ended Dec. 31, Baron’s five largest capital markets holdings are FactSet Research Systems Inc. (FDS, Financial), MSCI Inc. (MSCI, Financial), Charles Schwab, Morningstar Inc. (MORN, Financial) and Houlihan Lokey Inc. (HLI, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
FactSet Research Systems
The investor trimmed his FactSet (FDS, Financial) stake by 0.16% during the fourth quarter, bringing the total to 2.68 million shares. It accounts for 3.61% of the equity portfolio and is the sixth-largest position. GuruFocus estimates Baron has gained 429.31% on the long-held investment.
The Norwalk, Connecticut-based company, which provides integrated financial data and software to investment firms, has a $15.68 billion market cap; its shares were trading around $409.91 on Tuesday with a price-earnings ratio of 37.33, a price-book ratio of 10.62 and a price-sales ratio of 8.28.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 96 out of 100, the GF Score indicates the company has high outperformance potential. While it received high ratings for profitability, growth and momentum, the financial strength and GF Value ranks were more moderate.
Of the gurus invested in FactSet, Baron has the largest stake with 7.01% of its outstanding shares. Tom Gayner (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and several other gurus also have positions in the stock.
MSCI
The guru curbed the MSCI (MSCI, Financial) stake by 0.38% during the quarter to 2.17 million shares. The position occupies 3.40% of the equity portfolio and is the seventh-largest holding. GuruFocus data shows the firm has gained approximately 159.69% on the investment over its lifetime.
The finance company headquartered in New York, which provides equity, fixed income, real estate indexes, portfolio analysis tools and ESG and climate products, has a market cap of $44.31 billion; its shares were trading around $554.09 on Tuesday with a price-earnings ratio of 51.69 and a price-sales ratio of 19.99.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 96 implies the company has high outperformance potential, driven by solid ratings for three of the categories and more moderate financial strength and GF Value ranks.
With a 2.72% stake, Baron is the largest guru shareholder of MSCI. Other guru investors include Fisher, Gayner, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Jefferies Group (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Charles Schwab
Prior to the recent purchase, Baron whittled down the Charles Schwab (SCHW, Financial) position by 0.22% during the fourth quarter, bringing the total to 6.71 million shares. As the 10th-largest holding as of Dec. 31, the stock represents 1.88% of the equity portfolio. GuruFocus found the guru has gained around 100.95% on the investment so far.
The Westlake, Texas-based company, which offers banking and investment services, has a $104.23 billion market cap; its shares were trading around $56.99 on Tuesday with a price-earnings ratio of 16.28, a price-book ratio of 3.92 and a price-sales ratio of 5.20.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
The company has good outperformance potential with a GF Score of 86 on the back of high ratings for profitability, growth, GF Value and momentum as well as a low financial strength rank.
Dodge & Cox is the company’s largest guru shareholder with 4.15% of its outstanding shares. Charles Schwab is also being held by Fisher, Al Gore (Trades, Portfolio)’s Generation Investment, Ruane Cunniff (Trades, Portfolio), Baillie Gifford (Trades, Portfolio) and many others.
Morningstar
The guru cut his stake in Morningstar (MORN, Financial) by 1.47% during the quarter to 1.13 million shares. The position makes up 0.82% of the equity portfolio. GuruFocus says Baron has gained approximately 246.01% on the investment to date.
Headquartered in Chicago, the company, which provides a variety of investment research and management services, has a market cap of $8.07 billion; its shares were trading around $189.90 on Tuesday with a price-earnings ratio of 116.50, a price-book ratio of 6.68 and a price-sales ratio of 4.35.
The GF Value Line suggests the stock is significantly undervalued currently.
With a GF Score of 94, the company has high outperformance potential. Although Morningstar raked in high ratings for four of the criteria, the financial strength rank was more moderate.
Holding a 2.67%stake, Baron is Morningstar’s largest guru shareholder. Simons’ firm, Chuck Royce (Trades, Portfolio), Jerome Dodson (Trades, Portfolio), Fisher and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates also own the stock.
Houlihan Lokey
The investor increased the Houlihan Lokey (HLI, Financial) holding by 0.02% during the quarter to a total of 1.30 million shares. It has a weight of 0.38% in the equity portfolio. GuruFocus research shows Baron has gained approximately 89.55% on the investment thus far.
The Los Angeles-based investment bank has a $6.03 billion market cap; its shares were trading around $87.85 on Tuesday with a price-earnings ratio of 23.30, a price-book ratio of 3.91 and a price-sales ratio of 3.16.
According to the GF Value Line, the stock is fairly valued currently.
The company has good outperformance potential due to its GF Score of 90. While Houlihan Lokey recorded a moderate GF Value rank, the other four categories received high ratings.
Baron is once again the company’s largest guru shareholder with 1.90% of its outstanding shares. Royce, Grantham, Simons’ firm and Richard Pzena (Trades, Portfolio) also have positions in Houlihan Lokey.
Additional holdings
Other capital markets stocks the guru held as of the end of 2022 included MarketAxess Holdings Inc. (MKTX, Financial), Moelis & Co. (MC, Financial), Tradeweb Markets Inc. (TW, Financial), XP Inc. (XP, Financial) and LPL Financial Holdings Inc. (LPLA, Financial).
