Morningstar Magazine - June/July 2018 - 112

Ten Questions

Baron's Cliff Greenberg on small-cap
growth investing and a Grateful Dead
cover band.
Laura Lallos, Morningstar magazine's managing
editor, interviewed Greenberg in April.
1. What distinguishes your approach to small-

cap growth?

We have stocks in Baron Small Cap Fund that
we have owned for over 10 years, and about half
of our investments are in stocks we have
held more than five years. A number of these
are "big winners" that have driven our
performance. We seek to replicate these successes
with a handful of new investments each year.
2. How has your strategy evolved over your career?

I increasingly favor high-quality businesses
that are leaders in their niches, have significant
barriers to competition, have strong growth
opportunities, and are well-managed. We seek
to buy them at reasonable multiples and
make our returns as the companies grow. I used
to focus more on bargain or undiscovered
stocks, but I found myself missing out on great
growth companies or selling too early.
Cliff Greenberg is a senior vice president
and portfolio manager at Baron Capital
and one of the longest-tenured members of
Baron's investment team. He joined the
firm in 1997 and since then has managed Baron
Small Cap Fund BSCFX, which has a
Morningstar Analyst Rating of Silver. From
1984 to 1996, Greenberg worked at HPB
Associates as a securities analyst and fund
manager and was named general partner
in 1991. He has a B.A. from Cornell University
and a J.D. from Columbia Law School.

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5. Is competition from Amazon.com AMZN steering
you from or toward certain areas?

Our ownership of consumer discretionary stocks
is way down from years ago, and that started even
before Amazon was wreaking havoc. But we
do own some retailers that we believe are immune,
that we were able to buy at cheap valuations
because so many retail stocks have been out of
favor. A new investment that fits this bill
is Hudson HUD, which operates stores in airports.
Our primary holdings in the sector are niche
service businesses such as Bright Horizons Family
Solutions BFAM, which provides corporatesponsored child care.
6. What's the best investment advice you've received?

"Water your flowers and cut your weeds." This
is my portfolio management mantra.
7. Where would you be working now, if not within

financial services?

It would have been fun to be a concert promoter,
like my son, or the general manager of my beloved
Green Bay Packers.

3. How are valuations in your opportunity set?

Valuations are a bit higher than in the recent
past but justified in our mind because
interest rates are still modest, inflation is in check,
and near-term growth rates are better than
in recent years.

8. What do you enjoy doing when you aren't investing?

Watching sports and playing golf, going to rock
concerts, and being with my fantastic family-
wife Alyssa, sons Josh and Mikey, and daughter
Jamie-and friends.

4. Where are you finding the best opportunities?

9. What are you recommending to friends these days?

We build the portfolio from the bottom up,
but the fund is most heavily weighted in information technology and industrials. I primarily
own software companies that provide digital
operating systems for businesses, such
as Guidewire Software GWRE, 2U TWOU, and
Aspen Technology AZPN. My industrials
holdings are an eclectic group of niche growth
businesses, including SiteOne Landscape Supply
SITE and John Bean Technologies JBT.

For fellow music lovers, Joe Russo's Almost
Dead. JRAD brings incredible energy to the music
of the Grateful Dead.
10. What is one of your favorite charities?

Brothers for Life, an organization run by disabled
Israeli combat soldiers that enables injured
soldiers to return to productive lives. My wife and
I are hosting a delegation in New York for a week
of great events and bonding.

http://www.Amazon.com

Table of Contents for the Digital Edition of Morningstar Magazine - June/July 2018