Baron Small Cap Strategy

Vertiv Holdings Co (VRT) is a pure-play full-service provider of digital-critical infrastructure solutions for the data center and communications end markets.
As the leader in critical infrastructure solutions for data centers, Vertiv is positioned to exceed end-market growth due to its strong competitive advantage, particularly in liquid cooling, which is essential for AI data centers given the increased energy density of the servers. We expect Vertiv to leverage its healthy contribution margins and strong execution to boost profits, driving robust free cash flow generation that the company could deploy into share buybacks or M&A to create additional value.

Red Rock Resorts, Inc. (RRR) owns and operates 20 local casinos in Las Vegas and is in the planning stages of developing and managing a tribal casino in California. The company also controls seven gaming-entitled sites consisting of almost 600 acres in Las Vegas and 30 acres in Reno.
Red Rock operates in the improving Las Vegas locals gaming market, which is now back to previous peak levels. We think the market is attractive, given favorable fundamentals including population growth 2.7 times the national average and $20 billion in projects either in the planning stages or under development. The market also offers the lowest tax rate in the U.S., with limitations on the development of new casinos in the region. Red Rock also has the option to develop or sell its owned acreage.

Guidewire Software, Inc. (GWRE) is a leading provider of core systems software to the global property and casualty (P&C) insurance industry.
Guidewire is a small player in a vast addressable market and benefits from P&C insurers’ need to upgrade 30-year-old systems. The company offers best-in-class functionality, as evidenced by its growing installed base and near-100% retention rates. After a multi-year transition period, we think Guidewire’s cloud migration is largely complete, and we expect accelerating revenue, expanding margins, and improving free cash flow over the next several years. We believe recent M&A in the vertical software space supports a meaningful value creation opportunity for shareholders.

Kinsale Capital Group, Inc. (KNSL) is a property and casualty (P&C) insurer focused exclusively on the excess and surplus (E&S) lines market, which includes risks that are unique or difficult to place in the standard insurance market.
We believe Kinsale is a well-run insurer that should grow earnings and book value per share much faster than its peers. The company's focus on the attractive E&S market, underwriting discipline, and efficient technology platform enable it to rapidly grow premiums while delivering industry-leading underwriting margins. Management is highly regarded and has decades of experience in the E&S market. We believe Kinsale has a long runway for growth in an attractive segment of the P&C insurance market.

SiteOne Landscape Supply, Inc. (SITE) is the largest wholesale distributor of landscape supplies in North America. Through its large branch network, the company offers a broad selection of products across irrigation, agronomics, hardscapes, and nursery to landscaping professionals.
While SiteOne is over three times the size of its closest competitor, it has only high-teens share of a highly fragmented market. It has significant opportunity to further consolidate the industry through accretive acquisitions, driven by an experienced management team with a strong M&A track record. With the company’s renewed focus on execution and improving underperforming branches, we expect margin expansion to accelerate in the coming years. It is also investing in technology and productivity initiatives to enhance the customer experience and improve sales efficiency.

Cognex Corporation (CGNX) is a leading provider of machine vision systems used in factory automation across the automotive, consumer electronics, logistics, and health care industries. Its machine vision products help manufacturers improve quality, reduce production errors, and lower manufacturing costs.
Machine vision is a foundational technology that underpins advancements in AI, robotics, next-generation automotive production, e-commerce fulfillment, product traceability, counterfeit prevention, consumer electronics manufacturing, and life sciences. Cognex is the global leader in machine vision and invests heavily in R&D to sustain its leadership and expand into new markets. The company’s competitive advantages include deep engineering expertise, an extensive patent portfolio, a strong distribution network, and the ability to service customers worldwide.

JBT Marel Corporation (JBTM) is a leading global technology solutions provider to high-value segments of the food and beverage industry.
JBT has been implementing an aggressive strategy to consolidate the food processing industry and expand margins amid favorable secular trends. We are positive on the company’s recent acquisition of Marel and believe the combination of two industry leaders should enhance growth and profitability as management realizes synergies. We expect a return to normalized industry growth of 4% to 6% organically, supplemented by acquisition-driven revenue growth and margin expansion that should increase free cash flow and create substantial shareholder value over time. 

Through its subsidiaries, TransDigm Group Incorporated (TDG) designs, produces, and supplies engineered aerospace components for commercial and military aircraft customers across the world.
TransDigm's parts are custom designed at the pre-production stage and approved by the Federal Aviation Administration and aircraft manufacturers. TransDigm is typically the sole supplier of 90% of the parts that it manufactures. While the company earns a modest return on original equipment parts, it earns large margins on after-market replacement parts for airframes that stay in service for decades, generating a substantial stream of recurring cash flow that is used for acquisitions and shareholder dividends.

Liberty Media Corporation - Liberty Formula One (FWONK) is a tracking stock that consists primarily of Liberty Media Corporation's interest in Formula One Group.
Formula One is a unique sports property that benefits from the rising value of broadcasting rights, new sponsorship deals, and strong third-party interest to host races. The sport continues to gain popularity globally and has seen impressive growth in the U.S. The growth in fan interest has translated into attractive contract extensions with race promoters and a number of new relationships with global brands. Additionally, Liberty Media recently announced its acquisition of Dorna Sports, the organization behind MotoGP, a fast-growing and emerging motorsport.

HealthEquity, Inc. (HQY) is one of the largest dedicated Health Savings Account custodians. The company offers Health Savings Accounts combined with a technology platform that serves as a single place for consumers to manage their health care savings and spending decisions.
The company should benefit from the secular shift towards greater consumer responsibility for health care costs. The number of people enrolled in high-deductible health plans eligible for Health Savings Accounts is expected to reach 27.5 million by 2019, up from 22 million at December 2017, driven by employer efforts to control health care costs. The company's technology platform is differentiated and designed to serve the needs of health care consumers. The business model is highly profitable and we think it is highly scalable.

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