Baron Energy and Resources Fund (BENIX)

Portfolio Management

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 3/31/2014)

The Review and Outlook for period ending March 31, 2014 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 3/31/2014)
  • 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 boom in shale oil drilling in the U.S. and Canada. Flotek shares were up sharply in Q1 as investors are increasingly recognizing the significant revenue and earnings growth potential of Flotek’s products. Flotek is still early in penetrating the market for its products and we continue to see strong upside in the shares over time.

  • RSP Permian, Inc. is an independent E&P company operating in the Permian Basin in West Texas. RSP went public in Q1 and its shares were up significantly from the IPO price on the strength of the growth opportunity surrounding horizontal development of multiple shale zones in the Permian. The company has been a leader in testing different zones and its results indicate that its acreage position is well situated. It has an experienced and entrepreneurial management team and is poised to grow production and cash flow rapidly over the next several years.

  • Tallgrass Energy Partners, LP is a master limited partnership formed in 2013 that provides natural gas transportation and storage services for customers in the Rocky Mountains and Midwest. Shares of Tallgrass climbed in Q1 on strong Q4 results driven by the parent’s strategy of selling assets into the MLP, execution of organic growth projects, and distribution growth guidance above expectations. We expect Tallgrass to close the gap in its valuation compared with that of its peers, as investors begin to appreciate the longevity of its growth story. 

Detractors (for quarter ended 3/31/2014)
  • SM Energy Co. is an independent E&P company operating in the Williston Basin and the Eagle Ford Shale. SM shares fell in Q1 in the wake of a Q4 update in which management revised down the expected reserve recoveries from parts of its acreage. These changes did not impact SM’s forward production or growth guidance, but the revision did result in a reduced net asset value estimate and raised questions about the duration of SM’s drilling inventory and growth. We believe the market overreacted, and the shares represent an attractive risk/reward.

  • Oasis Petroleum, Inc., an independent E&P company, is one of the largest players in the Williston Basin Bakken Shale oil play. Shares fell in Q1 on concerns around resource productivity, near-term operating costs, and weather related impacts on production and guidance. While Oasis indicates that productivity on parts of its acreage will be quite variable, the overall impact has not materially affected our valuation estimate. We believe shares remain undervalued, especially relative to the potential and duration of Oasis’ growth opportunity.

  • Chart Industries, Inc. is a leading global manufacturer of highly engineered equipment used in production, storage and end-use of natural and industrial gases. Chart shares fell in Q1 as it saw some delays in large projects, which negatively impacted forward year results and 2014 guidance. As the global development of liquid natural gas (LNG) infrastructure continues to accelerate, Chart will have the opportunity to increase capacity and profitability. We still believe that LNG prices will climb over the long term and see Chart as a direct beneficiary.

Quarterly Attribution Analysis (for quarter ended 3/31/2014)

The Quarterly Attribution Analysis for period ending March 31, 2014 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.