Baron Fifth Avenue Growth Fund (BFTHX)

Portfolio Management

AlexUmansky
Alex Umansky

Fund Manager since 2011

View All Commentary by Alex

Fund Description

Baron Fifth Avenue Growth Fund invests in large growth companies.

    

Portfolio Commentary

Retail Performance

Review and Outlook (for quarter ended 3/31/2016)

The Review and Outlook for period ending March 31, 2016 is not yet available

Top Contributors/Detractors to Performance

Contributors (for quarter ended 3/31/2016)
  • Shares of Facebook, Inc., the world’s largest social network, rose in Q1, driven by improving consumer engagement and monetization. Facebook is the largest beneficiary of the shift in consumer engagement to mobile. Facebook is using its leadership position to provide global advertisers targeted marketing capabilities at scale. Facebook is in the early stages of monetizing online video and Instagram, which are starting to contribute to incremental revenue growth. WhatsApp and Oculus provide additional avenues for growth opportunities.

  • Shares of Brookfield Asset Management, Inc. rose in Q1 due to strong conditions in most of its business segments. The company is a global alternative asset manager with approximately $200 billion in assets under management, with a focus on real estate property, infrastructure, renewable energy, and private equity. A high quality portfolio, stable cash flows and attractive growth opportunities, global scale, a quality balance sheet, and an excellent management team with significant insider ownership support our favorable view.

  • Equinix, Inc., an operator of carrier-neutral data centers, continued to make progress on several fronts: 1) the closing of its Telecity acquisition in Europe, 2) a strong finish to 2015 with organic growth beating analyst expectations, and 3) maintaining financial flexibility and a strong balance sheet in an uncertain market. In addition, supply/demand in the data center space is favorable and price accommodative with consolidation capping supply and cloud and outsourcing lifting demand. All of those contributed to an increase in the stock price in Q1.

Detractors (for quarter ended 3/31/2016)
  • Shares of Amazon.com, Inc., the world’s largest retailer, declined in Q1 despite reporting strong revenue growth due to retail margins being lower than anticipated. Amazon has responded by instituting substantial fulfillment and supply chain fee increases for merchants on the platform. We estimate that these fee increases should start to alleviate the recent pressure on retail margins in the upcoming quarters. Amazon’s other major business segment, Amazon Web Services (AWS) continues to gain traction with enterprise customers, and over time, we expect AWS to be the larger contributor to value creation for the company.

  • LinkedIn Corp. is the world’s largest online professional network. It has three business segments: Hiring Solutions, Marketing Solutions, and Premium Subscriptions, each serving different customers. Despite strong 4Q15 results, shares were down in Q1 due to a weak 2016 outlook. After several quarters of inconsistent results, we believe management is finding it increasingly difficult to manage the complexity of three businesses. We exited the position.

  • Shares of Alexion Pharmaceuticals, Inc. fell sharply in Q1 as a result of the massive correction in the biotech/pharma space. Alexion develops treatments for rare diseases. Its high foreign exchange exposure and high multiple also pressured the stock. Overall, we believe there have been no significant changes to the fundamentals of Alexion’s story and we retain conviction.

Quarterly Attribution Analysis (for quarter ended 3/31/2016)

The Quarterly Attribution Analysis for period ending March 31, 2016 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 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. I Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.

Source: FactSet PA.