Baron Focused Growth Fund (BFGFX)
Fund Manager since
View All Commentary by
Baron Focused Growth Fund invests in a focused portfolio of small and mid-size growth companies.
Review and Outlook
U.S. stock markets continued to exhibit volatility during the three months ended December 31, 2015, as investors reacted to events overseas and at home. After a significant decline in the third quarter, the fourth quarter began with a strong rally in U.S. equities. Markets were boosted by soft economic data suggesting the Federal Reserve would continue to delay a rate hike. Talk of additional stimulus from the European Central Bank and a rate cut by China augmented the global trend of easy monetary policy. An easing of concerns around the negative impact of a slowdown in China and a modest recovery in oil prices also helped drive gains.
As the quarter progressed, signs of an improving U.S. economy and a seemingly more stable global economy inspired the Fed to signal it would start a rate increase cycle. In December, the Fed raised interest rates modestly for the first time since 2006. After an initial rally, the markets sold off some fourth quarter gains over concerns about the implications of Fed tightening in the face of questions around employment trends, commodity prices, overseas growth, and corporate earnings.
Baron Focused Growth Fund increased in the quarter. Information Technology (IT), Industrials, and Telecommunication Services were the top contributing sectors to performance. Health Care and Financials detracted. Performance of the IT sector was driven by gains in four of five holdings, including the second biggest contributor to performance, CoStar Group, Inc. Industrials benefited from a sharp increase in the share price of CaesarStone Sdot-Yam Ltd., recapturing some of its earlier losses after reporting disappointing financial results. Solid gains in the stock price of the Fund's sole Telecommunication Services holding Iridium Communications Inc. helped boost that sector's performance. Health Care lost some ground due to a dip in the stock price of the Fund's sole sector holding, Inovalon Holdings, Inc. Weakness in Financials was driven largely by a stock price drop in FactSet Research Systems Inc.
A significant percentage of the market weakness was attributable to the Energy sector and companies that service the energy industry as a result of the decline in oil prices. We think the constrained economic environment caused by low oil prices will eventually be offset by faster growth in the rest of the economy, as assets previously allocated by consumers and businesses to energy-related costs are redeployed.
Investing for growth is investing in the future, and when the future seems especially uncertain, investors tend to exit growth stocks. This behavior has contributed to the recent contraction in many growth stocks, despite the strong fundamentals and continued growth of these companies. We think the economy is in good shape and has been getting stronger. We believe this creates investment opportunities for growth investors like us.
Top Contributors/Detractors to Performance
Quarterly Attribution Analysis
The Quarterly Attribution Analysis for period ending December 31, 2015 is not yet available
Yearly Attribution Analysis
The Yearly Attribution Analysis for period ending December 31, 2015 is not yet available
Back to Top
Invest In Baron Funds Today
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. Current and future portfolio holdings in the Fund are subject to risk.
Source: FactSet PA.