Baron Energy and Resources Fund (BENIX)

Portfolio Management

JamesH.Stone
James H. Stone

Fund Manager since 2011

View All Commentary by James

Fund Description

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

    

Portfolio Commentary

Institutional Performance

Review and Outlook (for quarter ended 6/30/2015)

The Review and Outlook for period ending June 30, 2015 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 6/30/2015)
  • Shares of SunEdison, Inc., the world’s largest renewable energy developer, rose in Q2, driven by the announcement of several acquisitions in emerging markets and an IPO filing for TerraForm Global, SunEdison’s emerging market “yieldco.” SunEdison also announced that it is considering a General Partnership structure to better recognize the value of the incentive distribution rights it will receive. These announcements were viewed positively as investors gained confidence that the company will successfully execute on its strategy.

  • Golar LNG Ltd. is a liquefied natural gas (LNG) midstream services company. The stock rebounded in Q2 on news of progress in Golar’s liquefaction projects. We see LNG gaining share in the global energy trade and Golar as a direct beneficiary of this trend. While LNG projects have long lead times and shifts in timing may create short-term disruption to pricing and earnings, with its current fleet and future liquefaction projects, we see Golar’s long term earnings capacity as significantly higher than what current financials suggest.

  • Parsley Energy, Inc. is an independent E&P company focused on the Permian Basin in West Texas. The improvement in oil prices, coupled with ongoing improvements in Parsley’s horizontal drilling results, gave investors increased confidence in the company’s value creation potential. Parsley’s competitive position in the Midland sub-basin of the Permian is looking stronger as it further delineates its acreage and proves its operational prowess. We see the shares as undervalued.

Detractors (for quarter ended 6/30/2015)
  • Bonanza Creek Energy, Inc. is an independent E&P company operating primarily in Northeast Colorado. The shares declined sharply following a credit rating downgrade in May to below investment grade. We believe Bonanza Creek has ample liquidity to weather this period of low oil prices and has made significant gains at reducing well costs and capital spending to better match its cash flows. Improved access to infrastructure will, we believe, also help results in the second half of the year. We view the shares as undervalued at current prices.

  • Flotek Industries, Inc. is a leading supplier of specialized chemicals to the oil & gas industry. Its proprietary citrus oil-based products experienced rapid growth in connection with the boom in shale oil drilling in North America. Despite this, the sharper-than-expected decline in U.S. drilling and completion activity has taken a toll on its earnings outlook and share price during the last couple of quarters. We see significant potential for differentiated organic growth and a rebound in long-term earnings power at Flotek.

  • Gulfport Energy Corp. is an independent E&P company focused primarily on the Utica shale in eastern Ohio. Gulfport has a premier acreage position that has been enhanced through recent acquisitions and a strong balance sheet. However, the shares declined sharply following the company’s second acquisition of a competitor in as many months coupled with an equity offering to fund the deal and weakening Appalachian gas prices. We think that these pressures will prove transitory and that Gulfport shares remain attractive.

Quarterly Attribution Analysis (for quarter ended 6/30/2015)

The Quarterly Attribution Analysis for period ending June 30, 2015 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 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.