Baron Discovery gets off to a fast start with a portfolio that is loaded with micro caps. Thinkstock By Ryan Ermey, Associate Editor From Kiplinger's Personal Finance, March 2015 The past year was a rough one for the little guys. While Standard & Poor’s 500-stock index returned 14%, the Russell 2000 index, which tracks small-company stocks, gained a mere 4%. Like most other small-stock funds, Baron Discovery (BDFFX) had trouble keeping up with the S&P 500. But the fund trumped the Russell index by nearly six percentage points.Tool: Mutual Fund Finder Discovery is the first fund that Laird Bieger and Randolph Gwirtzman have managed. Previously, they served as analysts for Baron Small Cap (BSCFX), a member of the Kiplinger 25. At Discovery, which began in September 2013, the managers seek firms with smart executives and high barriers against competition. They buy a stock if they think it can double in three to five years. Sponsored Content Bieger and Gwirtzman prefer really small companies. The average market capitalization of Discovery’s holdings is $1.3 billion, compared with $2.8 billion for the typical small-cap growth fund. About half of the fund’s assets are in so-called micro-cap stocks—the smallest of the small. And that suits the managers just fine. When he and Bieger were analysts, says Gwirtzman, “we saw many companies that we were very interested in but were either too small or outside the comfort zone of some of the other Baron managers.” More than half of the fund’s assets are in health and technology stocks. Two biotech firms are among its five biggest holdings: BioScrip and Spectranetics. *Annualized for three and five years. @Rankings exclude share classes of this fund with different fee structures or higher minimum initial investments. ** Closed to new investors. r maximum redemption fee. Sources: Morningstar Inc., Vanguard.