Baron Energy and Resources Fund (BENIX)

Portfolio Management

JamesH.Stone
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 12/31/2015)

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

Top Contributors/Detractors to Performance

Contributors (for quarter ended 12/31/2015)
  • Parsley Energy, Inc. is an independent exploration and production company focused on the Permian Basin in West Texas. Shares rose on strong Q3 results. Parsley has a solid balance sheet and superior footprint in the most prolific part of the play that generates some of the highest rates of return in the U.S. Strong operational performance has enabled Parsley to outperform most small cap E&P companies during the oil price downturn. It has grown rapidly over the past seven years, and we think it will continue to deliver peer-leading performance.

  • Columbia Pipeline Partners LP is a growth-oriented midstream energy master limited partnership formed by the Columbia Pipeline Group to fund attractive growth projects in the Appalachian basin. After facing market pressure due to anticipated fund raising, shares of the MLP recovered in Q4 as its parent decided to issue more of its equity to finance its projects and support the MLP’s growth. This event removed the equity overhang and emphasized management’s commitment to the accretive growth plan for the MLP.

  • Shell Midstream Partners, L.P. is master limited partnership formed by Royal Dutch Shell in 2014. Shares of Shell Midstream increased in Q4 as it recovered from the selling pressure on the broad MLP market. We believe Shell Midstream belongs to a group of high growth, high quality stocks that  will continue to have a premium valuation due to their stability and growth prospects. We continue to believe in Shell Midstream’s growth potential and the low sensitivity of its cash flows to commodity prices.

Detractors (for quarter ended 12/31/2015)
  • SM Energy Co. is an independent exploration and production company focused on shale oil fields in South Texas and North Dakota. Shares fell amid a decline in crude oil prices. SM has a strong balance sheet and increased productivity as a result of improvements in well completions. However, its cash flow - and share price - remain highly tethered to oil prices. While we believe that SM can generate attractive rates of return, the economics of the regions in which it operates have become increasingly marginal. We exited our position.

  • Flotek Industries, Inc. supplies a proprietary product dubbed the “complex nano-fluid (CnF)” to oil & gas companies that helps boost shale well productivity. Shares fell on a short seller’s assertion that Flotek had inflated claims of CnF’s efficacy. However, independent analyses supported our views regarding CnF’s positive impact on well productivity. Slumping oil prices also hurt shares. We expect shares to rebound as we think Flotek can show continued solid demand for and, in time, rising sales of CnF, the key to long-term earnings growth.

  • Energy Transfer Equity, L.P. owns equity interests in Energy Transfer Partners, Sunoco Logistics, and Sunoco LP. During 2015, Energy Transfer Equity offered to acquire Williams, a large-cap midstream master limited partnership, creating the world’s largest midstream energy company. The resulting financing gap in a declining commodity environment and liquidity crisis put pressure on the stock. We believe the company has a premier asset footprint and experienced management team and find its historically low valuation an attractive entry point.

Quarterly Attribution Analysis (for quarter ended 12/31/2015)

The Quarterly Attribution Analysis for period ending December 31, 2015 is not yet available

Yearly Attribution Analysis (for year ended 12/31/2015)

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 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.