Baron Global Advantage Fund (BGAFX)

Portfolio Management

AlexUmansky
Alex Umansky

Fund Manager since 2012

View All Commentary by Alex

Fund Description

Baron Global Advantage Fund invests in growth companies of all sizes anywhere.

  

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)
  • Mellanox Technologies Ltd. supplies semiconductor-based interconnect solutions and services. Strong Q4 results re-instilled investor confidence in Mellanox’s ability to grow profitably. In addition, the completion of its EZchip acquisition and adjusted guidance laid out a strong financial case for this combination. We view Mellanox’s Ethernet business as a significant open ended opportunity. We expect Mellanox to be a high-end market leader and protect its high margin business model with strong innovation and product leadership.

  • 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.

  • TAL Education Group is a leading Chinese K-12 tutoring company, operating over 300 learning centers in two dozen cities across China. Shares of TAL rose in Q1, driven by growth in student enrollments of more than 50%. We maintain conviction in TAL Education Group as we see its significant opportunity to gain market share in after-school tutoring by expanding existing learning centers, opening new learning centers in existing cities, and expanding into new cities, while generating strong cash flow.

Detractors (for quarter ended 3/31/2016)
  • Shares of JUST EAT plc, the leading online food takeout marketplace in Europe, Latin America, and Canada, were down in Q1 despite reporting second half of 2015 results that beat analyst estimates. Potential entry by Uber into restaurant delivery in the U.K., JUST EAT’s largest market, is driving heightened competitive concerns. We believe JUST EAT competes in a different market segment from Uber and other delivery-oriented companies. We think JUST EAT is the leader in a winner-take-most/all business that will not be meaningfully disrupted by new competitors.

  • 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.

  • Shares of TerraForm Global, Inc., an owner of renewable energy power plants in emerging markets, fell during Q1 due to uncertainty related to the implications of a potential bankruptcy of parent company SunEdison. In addition, TerraForm Global was unable to execute on transactions to create its formation portfolio. These factors make the company difficult to value, and the stock sold off as a result. We continue to hold the stock as we believe the company is solvent and has enough liquidity to continue.

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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