Baron Energy and Resources Fund (BENIX)
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Baron Energy and Resources Fund invests in securities of energy and resources companies and related companies of all sizes.
Review and Outlook
The Review and Outlook for period ending September 30, 2016 is not yet available
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
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.
Baron Energy and Resources Fund rose 9.89% in the third quarter and outperformed the S&P North American Natural Resources Sector Index by 566 basis points, due to a combination of stock selection and relative sector/sub-industry weights. Smaller cap energy stocks outperformed for a second consecutive quarter, and the Fund’s bias towards these companies also aided relative performance.
Energy and Materials investments added the most value, while no sectors materially detracted from relative performance. Within Energy, outperformance of oil & gas exploration & production (E&P) holdings, led by Parsley Energy, Inc., Encana Corp., Concho Resources, Inc., and Rice Energy Inc., and larger exposure to this strong performing sub-industry contributed 309 basis points to relative results. Parsley, Encana, and Concho were the three largest contributors to absolute results, while shares of Rice, an independent E&P company focused on the Marcellus and Utica shales in Pennsylvania and Ohio, rose after the company raised production guidance, significantly lowered cash costs, and increased drilling activity without changing its capital budget. Lack of exposure to poor performing large-cap stocks in the integrated oil & gas sub-industry and outperformance of U.S. Silica Holdings, Inc. in the oil & gas equipment & services sub-industry also added value in the Energy sector. Shares of U.S. Silica, one of the largest low-cost suppliers of sand used as a proppant for the hydraulic fracturing of oil and gas wells, outperformed following the announcement of two strategic acquisitions. The overall uptick in drilling activity during the quarter also bolstered U.S. Silica’s stock price. Within Materials, outperformance of specialty chemicals holdings Flotek Industries, Inc. and Kraton Corporation and lower exposure to lagging gold stocks, which fell 8.4% as a group within the index, lifted relative results. Flotek’s shares rallied sharply following strong sales of the company’s proprietary product, complex nano-fluid, while shares of Kraton rose after investors reacted favorably to management’s long-term plan to achieve cost reductions and synergies from the Arizona Chemical acquisition.
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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.