Baron Health Care Fund: Navigating Opportunities in a Dynamic Sector
The Baron Health Care Fund advanced 5.81% in the quarter ended September 30, 2024, slightly trailing the Russell 3000 Health Care Index’s 6.74% gain. Since its inception in April 2018, the Fund has delivered a 13.02% annualized return, outpacing the broader market.
Stock Selection Drives Performance
In the third quarter, the Fund’s performance was impacted by stock selection in health care equipment, distributors, life sciences tools, and pharmaceuticals. Notably, investments in biotechnology companies Arcellx, Inc. and argenx SE contributed to the Fund’s relative gains. Strong stock selection in health care facilities and health care supplies also added value.
Investment Approach
Our strategy is to identify competitively advantaged growth companies with secular growth opportunities, durable competitive advantages, and strong management teams. We conduct independent research and take a long-term perspective, focusing on businesses that solve problems in Health Care, whether by reducing costs, enhancing efficiency, or improving patient outcomes.
Portfolio Construction
We build the portfolio from the bottom up, one stock at a time, using the Baron investment approach. We do not try to mimic an index, and we expect the Fund to look very different than the Benchmark. We loosely group the portfolio into three categories of stocks: earnings compounders, high-growth companies, and biotechnology companies.
New Positions and Exits
During the quarter, we added six new positions, including Danaher Corporation, Regeneron Pharmaceuticals, Inc., Vaxcyte, Inc., Insmed Incorporated, and Ultragenyx Pharmaceutical Inc. We exited six positions, including McKesson Corporation, iRhythm Technologies, Inc., Edwards Lifesciences Corporation, Tempus AI, Inc., and Merck & Co., Inc.
Health Care Trends and Innovations
We remain optimistic about the Health Care sector, driven by advances in science and technology leading to new ways to diagnose, monitor, and treat diseases. We are monitoring trends in managed care, life sciences tools, and medical devices, as well as innovations in areas such as stem cell transplants for type 1 diabetes and nasal sprays for respiratory infections.
Investment Risks
Investors should consider the investment objectives, risks, and charges and expenses of the investment carefully before investing. The prospectus and summary prospectus contain this and other information about the Funds. You may obtain them from the Funds’ distributor, Baron Capital, Inc., by calling 1-800-99-BARON or visiting BaronCapitalGroup.com. Please read them carefully before investing.
About the Portfolio Manager
Neal Kaufman, Portfolio Manager of the Baron Health Care Fund, has over 20 years of investment experience. He is committed to delivering long-term growth and income to investors through a disciplined investment approach.
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