Baron Fifth Avenue Growth Fund (BFTIX)
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 Fifth Avenue Growth Fund increased 10.16% in the third quarter and outperformed the Russell 1000 Growth Index by 558 basis points. During the quarter, stock selection and, to a lesser extent, relative sector weights lifted relative results.
Consumer Discretionary, Health Care, and Information Technology (IT) investments and lack of exposure to the lagging Consumer Staples sector, which fell 4.9% in the index, contributed the most to relative results. Within Consumer Discretionary, outperformance of internet & direct marketing retail holdings Amazon.com, Inc. and The Priceline Group, Inc. and larger exposure to this strong performing sub-industry added the most value. Amazon was the largest contributor to absolute results, while shares of leading online travel agency Priceline rose on strong Q2 results and a robust outlook for Q3. Naspers Limited, a South Africa-based internet and media platform operator, also contributed to relative performance due to its large ownership position in Tencent Holdings Limited, whose stock price rose more than 20% in the quarter. Strength in Health Care was mostly attributable to the outperformance of Illumina, Inc., the third largest contributor on an absolute basis, and biotechnology holdings Biogen, Inc. and Regeneron Pharmaceuticals, Inc. Within IT, outperformance of internet software & services holdings, led by Alibaba Group Holding Limited and Alphabet Inc., and significantly larger exposure to this better performing sub-industry contributed the most to relative results. Alibaba was the second largest contributor to absolute performance, while shares of leading search and online advertising company Alphabet were up in the quarter, driven by quarterly results that surpassed Street expectations. Payment networks Mastercard Incorporated and Visa, Inc. also aided relative performance.
Larger exposure to the underperforming Real Estate sector, which was hurt by the poor performance of REITs, detracted the most from relative performance.
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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. Investing in the stock market is always risky. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.
Source: FactSet PA.