Baron Emerging Markets Fund (BEXFX)

Portfolio Management

Michael Kass

Fund Manager since 2010

View All Commentary by Michael

Fund Description

Baron Emerging Markets Fund invests primarily in growth companies in developing countries.


Portfolio Commentary

Retail Performance

Review and Outlook (for quarter ended 9/30/2014)

The Review and Outlook for period ending September 30, 2014 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 9/30/2014)
  • Shares of Indian pharmaceutical company Divi’s Laboratories Ltd. rose in Q3 on news of U.S. FDA approval for its manufacturing facilities. Divi’s is a leading manufacturer of complex active pharmaceutical ingredients and also provides customized research outsourcing services to global pharmaceutical players. With its high profitability and long-term relationships with major pharma clients, we believe Divi’s is now well positioned to sustain mid-to-high teens earnings growth for the next three to five years.

  • Shares of Lupin Ltd. rose in Q3, driven by strong financial results and increased investor appetite for high quality emerging market health care stocks. As a leading Indian generics pharmaceutical player, the company is experiencing substantial growth in the U.S. as branded drugs continue to go off-patent. We believe Lupin is well positioned to generate double digit earnings growth for the next three to five years.

  • Shares of India car battery company Amara Raja Batteries Ltd. increased in the quarter, on the strength of solid Q2 results that showed that the company is continuing to gain market share in the aftermarket battery segment. We believe Amara Raja has done an excellent job building a distribution network to compete with its main competitor, and its slowly rising prices evidence this fact.

Detractors (for quarter ended 9/30/2014)
  • Shares of Chinese infant formula company Biostime International Holdings Ltd. declined in Q3 due to below-consensus earnings results. The emergence of e-commerce as a dominant sales channel is allowing new entrants to gain market share through online promotions. Biostime’s deep distribution networks, which had provided a key competitive advantage, are eroding, and it is still in the early stages of formulating its online strategy. We trimmed our position owing to limited earning visibility amidst intensifying competition and lower barriers to entry.

  • Shares of HIWIN Technologies Corp., a Taiwanese manufacturer of factory automation equipment, fell in Q3. The company reported earnings below expectations due to higher-than-expected operating expenses and the share price corrected despite solid long-term trends. We remain investors in HIWIN due its exposure to industrial automation, which has favorable long-term trends. We believe HIWIN's product portfolio and entrance into robotics position it to capitalize on growing industry demand.

  • Shares of Indian cable TV provider DEN Networks Ltd. declined in Q3, as the deadline for pan-India digitization was pushed back by two years. DEN is also experiencing near-term challenges in collecting its fair share of subscription revenue from local cable operators. The company is well positioned to benefit from the ongoing digitization of cable systems as mandated by the Government of India. We retain conviction in DEN due to the expected multifold increase in subscription revenue/earnings post-digitization.

Quarterly Attribution Analysis

This Fund does not have an Attribution Analysis for this time period.

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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. Current and future portfolio holdings in the Fund are subject to risk.

Source: FactSet PA.