Baron Energy and Resources Fund (BENIX)

Portfolio Management

James H. Stone

Fund Manager since 2011

View All Commentary by James

Fund Description

Baron Energy and Resources Fund invests in securities of energy and resources companies and related companies of all sizes.


Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 3/31/2015)

The Review and Outlook for period ending March 31, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 3/31/2015)
  • The contributors to performance for period ending March 31, 2015 is not yet available

Detractors (for quarter ended 3/31/2015)
  • The detractors to performance for period ending March 31, 2015 is not yet available

Quarterly Attribution Analysis (for quarter ended 3/31/2015)

When reviewing performance attribution on our portfolio, please be aware that we construct the portfolio from the bottom up, one stock at a time. Each stock is included in the portfolio if it meets our rigorous investment criteria. To help manage risk, we are aware of our sector and security weights, but we do not include a holding to achieve a target sector allocation or to approximate an index. Our exposure to any given sector is purely a result of our stock selection process.

The Baron Energy and Resources Fund (Institutional Shares) increased 1.73% in the first quarter and outperformed the S&P North American Natural Resources Sector Index by 324 basis points.

The Fund’s small and small to mid–cap energy holdings, which were meaningful detractors in the fourth quarter of 2014, generated modest positive returns this quarter, and contributed positively to relative results. The Fund’s lack of exposure to lagging large-cap energy stocks, such as integrated oil & gas companies, also aided relative performance.

The Fund’s oil & gas exploration & production (E&P), oil & gas storage & transportation, and renewable energy-related investments were the largest contributors to relative results. The Fund’s E&P holdings contributed the most to relative performance after rising 7.0% as a group, with SM Energy Co., Concho Resources, Inc., Newfield Exploration Co., and Laredo Petroleum, Inc. each up double digits. The Fund’s storage & transportation investments, which consist mostly of master limited partnerships (MLPs) and general partnerships (GPs), rose 3.9% as a group and outperformed their counterparts in the index by 279 basis points, led by double-digit gains from Tallgrass Energy Partners, LP and SemGroup Corp. Despite declining oil prices, shares of MLP Tallgrass outperformed after management accelerated its growth plans and outlined an annualized growth rate target of 20% over the next three years. Shares of C-Corp SemGroup outperformed as management moved forward with its MLP strategy of selling assets at an accelerated pace and announced a $500 million greenfield Gulf Coast pipeline project. The Fund’s significantly larger exposure to the outperforming storage & transportation sub-industry also added value. Strength in renewable energy-related holdings was due to the outperformance of SunEdison, Inc., an Information Technology company and one of the Fund’s largest contributors to absolute performance, as well as renewable electricity companies Abengoa Yield plc and TerraForm Power, Inc. Shares of Abengoa Yield benefited as investors reacted positively to the company’s securing financing for its development portfolio, while TerraForm’s shares rose sharply after the company’s deal for First Wind Energy closed.

The Fund’s lower exposure to oil & gas refining & marketing stocks, which rose 17.5% as a group within the index, and underperformance of its oil & gas equipment & services investments detracted the most from relative results. Weakness in equipment & services was mostly attributable to the underperformance of RigNet, Inc., a provider of remote communication systems and services principally to the global oil and gas and maritime industries, and Canyon Services Group, Inc., a Canadian-based oilfield service company that specializes in hydraulic fracturing. RigNet’s shares suffered amid concerns that weakness in demand and utilization from offshore drilling rigs, its biggest customer segment, is causing a slowdown in the company’s business. Canyon Services Group was the Fund’s third largest detractor on an absolute basis and was sold early in the quarter.

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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 advise 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.