Baron Fifth Avenue Growth Fund (BFTHX)
Review and Outlook
Baron Fifth Avenue Growth Fund was flat in the second quarter of 2016, compared to gains of 0.6% for the Russell 1000 Growth Index and 2.5% for the S&P 500 Index.
Small caps outperformed large caps and value significantly outperformed growth, an unfavorable backdrop for the kinds of companies we own in the Fund. Though most of our core holdings performed well over the last three months, relative performance was uninspiring due to lower exposure to Consumer Staples and Energy, two of the better performing GICS sectors in the S&P 500 Index during the quarter and year-to-date. While our stock picking was fine overall, stock selection in Health Care, and especially biotechnology and life sciences tools and services, detracted and was largely to blame for the portfolio’s lack of total positive returns during the quarter.
The Consumer Discretionary, Financials, and Materials sectors contributed the most to performance in the quarter. The Information Technology (IT), Health Care, and Consumer Staples sectors detracted. A double-digit gain in the stock price of Amazon.com, Inc., the Fund’s top contributor, drove contribution of the Consumer Discretionary sector. Financials benefited from the strong performance of Equinix, Inc., the second largest contributor in the quarter. A gain in the stock price of the Fund’s sole Materials holding, Monsanto Co., lifted that sector’s performance. Shares of this agriculture biotechnology company rose after German agricultural giant Bayer AG made an unsolicited takeover bid of $62 billion. With declines in 12 of 14 holdings, including the top and third biggest detractors, the IT sector had a challenging quarter. Illumina, Inc., the Fund’s second largest detractor, led the overall weak performance of the Health Care sector. Consumer Staples lost ground due to a decline in the stock price of membership-based warehouse club company Costco Wholesale Corp., the Fund's only holding in the sector.
Our goal is to maximize long-term returns without taking significant risks of permanent loss of capital. We continue to focus on identifying and investing in unique companies with sustainable competitive advantages and the ability to redeploy capital at high rates of return. We are optimistic about the long-term prospects of the companies we are invested in and continue to search for new ideas and investment opportunities.
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
The Quarterly Attribution Analysis for period ending June 30, 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. I Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.
Source: FactSet PA.