Baron Energy and Resources Fund (BENIX)

Portfolio Management

JamesH.Stone
James H. Stone

Fund Manager since 2011

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Fund Description

Baron Energy and Resources Fund invests in securities of energy and resources companies and related companies of all sizes.
 

    

Fund Resources

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Jamie Stone seeks long-term growth in energy and materials.

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Portfolio Commentary

Institutional 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)
  • Athlon Energy, Inc. is an independent exploration and production company focused on the Midland sub-basin in the greater Permian Basin in West Texas. The company went public in August 2013 and has done an excellent job of operating its existing assets, transitioning into a top flight horizontal driller, de-risking its acreage, and acting as an opportunistic acquirer of complimentary assets. At quarter-end, Athlon agreed to be acquired by Encana Inc. for $58.50 per share, generating a nearly three-fold return from its IPO price.

  • Tallgrass Energy Partners, LP is a master limited partnership formed in 2013 to acquire, develop, and operate midstream energy assets. During the quarter, Tallgrass closed on its first equity stake in the Pony Express pipeline, helping lift the share price. The pipeline represents a two-year growth opportunity for Tallgrass. We believe the value of additional assets that Tallgrass is positioned to acquire from its parent company is significant and contributes to an attractive growth trajectory over time.

  • RoseRock Midstream, L.P. is a master limited partnership formed by SemGroup Corporation to acquire, develop, and operate its midstream energy assets. The stock rose on the strength of better-than-expected Q2 results, including revenue that was up 80% on a year-over-year basis. We think RoseRock will see significant cash flow growth following its acquisition of the White Cliffs pipeline. Organic projects and the potential to acquire two more pipelines are emerging as opportunities to extend growth.

Detractors (for quarter ended 9/30/2014)
  • CARBO Ceramics, Inc., is, principally, the leading provider of ceramic proppants that are used in the hydraulic fracturing process for oil and gas wells. CARBO shares fell sharply in Q3 after one of its key clients announced it was shifting its wells to sand from ceramics and it became clearer that this shift could be imitated by other clients. CARBO's rerouting of volumes away from this client has resulted in increased price competition. We exited our position in CARBO as this transition and the resulting negative earnings effects became clearer.

  • Oasis Petroleum, Inc., an exploration and production company, is one of the largest players in the Williston Basin in North Dakota. Falling oil prices took a heavy toll on Oasis and other producers in Q3. In addition, Q2 production came in at the low end of expectations. These two factors largely explain the sharp decline in Oasis shares in Q3.We believe Oasis remains on track for several years of strong production growth, and new well completion techniques appear to be improving well productivity and recovery rates. We believe this bodes well for long-term upside in stock price.

  • Flotek Industries, Inc. is a leading supplier of specialized chemicals to the oil & gas industry. Its proprietary citrus oil-based products are experiencing rapid growth related to the shale boom in the U.S. and Canada. Shares fell over concerns that the increasing use of massive quantities of sand in well completions would mitigate usage of Flotek’s main product. Concerns over oil prices also pressured the shares. These fears appear unwarranted, as Flotek’s preliminary Q3 revenue figures reflect continued strong growth across the board.

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 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.