Baron Asset Fund (BARAX)
Review and Outlook
During the three-month period ended December 31, 2015, market indexes rebounded sharply from their retreat during the previous quarter to end the year in modestly positive territory. The biggest news during the quarter was the Federal Reserve’s decision to increase short-term interest rates for the first time since the financial crisis. Although widely expected, the stock market appeared to accept the Fed’s view that the economy was now strong enough to continue growing in the face of moderately increasing rates.
Baron Asset Fund increased in the period. The Information Technology (IT), Financials, and Consumer Discretionary sectors were the top three contributors to performance. Consumer Staples was a material detractor in the quarter. IT’s gains were led by syndicated IT research provider Gartner, Inc. and Internet infrastructure service provider VeriSign, Inc. Financials benefited from strong performances by Willis Towers Watson Plc, the third largest contributor in the period, and brokerage firm Charles Schwab Corp. Performance of the Consumer Discretionary sector was driven in large part by Vail Resorts, Inc., which was the top contributor in the quarter. Both of the Fund’s Consumer Staples investments lost ground in the quarter, led by United Natural Foods, Inc. Shares of this leading natural foods distributor declined after the company reported disappointing financial results.
Despite the recent stock market volatility, we continue to believe that high-quality, mid-sized growth stocks represent an attractive long-term investment opportunity. The U.S. economy is among the world’s healthiest, and, particularly after the recent stock market correction, its equity market multiples are within the range of their long-term averages. Interest rates remain at historic lows, and we believe that equity markets often perform well, even after rates begin to increase. Employment and housing trends continue to improve, and energy prices remain meaningfully below their recent levels. We think that our portfolio of what we believe are well-managed, competitively advantaged, fast growing companies will continue to perform well in this environment, although we cannot guarantee that they will.
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
The Quarterly Attribution Analysis for period ending December 31, 2015 is not yet available
Yearly Attribution Analysis
The Yearly Attribution Analysis for period ending December 31, 2015 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 judgment 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 Baron Funds are subject to risk.