Baron Real Estate Fund (BREIX)
Fund Manager since 2009View All Commentary by Jeffrey
Baron Real Estate Fund invests in securities of real estate and real estate related companies of all sizes.
Portfolio CommentaryInstitutional Performance
Review and Outlook (for quarter ended 3/31/2013)
The broad stock market performed strongly in the first quarter, buoyed by a combination of aggressive interventionist policies of the world’s central banks, the continuation of positive economic performance, most notably in the U.S., and the perceived lower risk of significant sovereign systematic risks.
We continue to advocate a broad and balanced approach to investing in real estate. We believe our hotel & leisure investments are well positioned due to their attractive valuations, low supply forecasts, and solid demand expectations. If economic growth continues to mend, hotels, in our opinion, should perform well. In the most recent quarter, we added to all of our hotel investments including Starwood Hotels and Resorts Worldwide, Inc., Hyatt Hotels Corp., Wyndham Worldwide Corp., Sunstone Hotel Investors, Inc., Ashford Hospitality Trust, Inc., LaSalle Hotel Properties, and Strategic Hotels & Resorts, Inc. It is our view that all of our hotel investments trade at discounts to their intrinsic value.
We continue to believe that the most notable development in real estate is the rebound in the U.S. housing market. We believe we are in the early stages of what will be a multi-year recovery for housing. The Fund continues to increase its exposure to companies that we believe will benefit from the rebound in the homebuilding market, including building products/services companies, such as Lowe’s Companies, Inc., senior housing operators, homebuilders, and land developers.
We believe that many of the Fund’s casino and gaming investments have real estate value that is not being reflected in their share prices. In the fourth quarter of 2012, Penn National Gaming announced its intention to separate its real estate assets from its operating assets. In other words, the company plans to transform itself into the first gaming-focused REIT. Its shares have appreciated strongly since that announcement, and we think the shares continue to offer attractive return potential from the current price. We believe our other casino and gaming investments also have the potential to unlock real estate value and should perform well if economic growth accelerates.
Finally, we remain optimistic about the growth prospects for real estate service companies because we believe they have superior and more open-ended growth potential and more attractive valuations than most REITs. Our current real estate services investments include CBRE Group, Inc., Jones Lang LaSalle, Inc., Kennedy-Wilson Holdings, Inc., and RealPage, Inc.
We have continued to lower our non-hotel REIT exposure. We believe more attractive valuation and growth prospects exist in most other non-REIT real estate categories.
Top Contributors/Detractors to Performance
Contributors (for quarter ended 3/31/2013)
Detractors (for quarter ended 3/31/2013)
Quarterly Attribution Analysis (for quarter ended 3/31/2013)
This Fund does not have a Quarterly Attribution Analysis for period ending March 31, 2013Invest In Baron Funds Today
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. Investing in the stock market is always risky. Current and future portfolio holdings in the Fund are subject to risk.
Source: FactSet PA.