Baron Focused Growth Fund (BFGFX)

Portfolio Management

RonBaron
Ron Baron

Fund Manager since 1996

View All Commentary by Ron

Fund Description

Baron Focused Growth Fund invests in a focused portfolio of small and mid-size growth companies.

    

  

Portfolio Commentary

Retail Performance

Review and Outlook (for quarter ended 12/31/2016)

The Review and Outlook for period ending December 31, 2016 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 12/31/2016)
  • Shares of global hotelier Hyatt Hotels Corp. increased in Q4 as investors rotated into lodging stocks, which we think will be one of the biggest beneficiaries of likely higher inflation. The company maintained its fiscal year 2016 guidance for revenue per available room and indicated on-track growth for 2017, which helped boost investor confidence in the business and the continued upward trajectory of the lodging cycle.

  • Shares of hotel franchisor Choice Hotels International, Inc. increased in Q4 as investors rotated into lodging stocks, which we think will be among the biggest beneficiaries of likely higher inflation. The consistency of the company’s revenue and earnings throughout the lodging cycle given its fee-based model and the strength of its dividend and share buyback program also helped boost the share price during the quarter.

  • Shares of Financial Engines, Inc., a defined benefits service provider, rose in Q4, as initiatives to improve enrollments appeared to be working. Cancellations declined as a new marketing program and live advisors improved communications with new members. Its acquisition of Mutual Fund Store has been integrated and these advisors have begun conducting seminars which should also improve enrollments, in our view. The acquisition opens the service to investable assets outside of defined contribution, potentially doubling the addressable market.

Detractors (for quarter ended 12/31/2016)
  • Shares of benefits software vendor Benefitfocus, Inc. detracted from Q4 performance. The company provided modestly lower than expected guidance for 2017. We see several short-term headwinds, including longer implementation periods for national accounts, slower employer signings because of a sales restructuring, and a revenue share of BenefitStore commissions. While these headwinds will likely weigh on reported growth through mid-2017, we don’t believe they impact the significant long-term opportunity.

  • Shares of CoStar Group, Inc., a real estate information and marketing services company, fell in Q4 on news that it is planning a $20 million investment for 2017 to expand its research, sales, and marketing capabilities. We believe this strategy will enable CoStar to upsell existing Loopnet customers to its core CoStar product, potentially driving $200 million of annual recurring revenue. We think trends in the core business are excellent, with revenue growth of 14% and margins improving 13% in the most recently reported quarter.

  • Shares of Caesarstone Ltd., a global manufacturer of quartz surfaces for kitchens and bathrooms, detracted from Q4 performance. The stock declined after the company reported quarterly financial results that missed Street expectations and lowered its full-year guidance. We remain optimistic based on Caesarstone’s respected brand and continued expected secular shift to quartz from other countertop materials.

Quarterly Attribution Analysis (for quarter ended 12/31/2016)

The Quarterly Attribution Analysis for period ending December 31, 2016 is not yet available

Yearly Attribution Analysis (for year ended 12/31/2016)

The Yearly Attribution Analysis for period ending December 31, 2016 is not yet available

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The prospective performance of the companies discussed herein is based on our internal analysis and reflect our opinions only. We cannot promise future returns and our opinions are a reflection of our best judgement at the time of publication. Our views are not intended as recommendations or investment advice to any person and are subject to change at any time based on market and other conditions and Baron has no obligation to update them. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.

Source: FactSet PA.