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Baron Funds' Comments on CARBO Ceramics

August 23, 2012 | About:
Holly LaFon

Holly LaFon

From Baron Funds' second quarter commentary:

CARBO Ceramics, Inc. (CRR) is the leading supplier of ceramic proppant to the shale oil and gas industry. CARBO Ceramic's share price fell significantly during the period as a result of a decline in gas drilling in the United States caused by unusually low gas prices. The decline in gas drilling caused CARBO to incur unusual transportation costs to reposition its proppant inventory. Less drilling coupled with this business' increased proppant production capacity and increased competition from ceramic and sand proppant produced in China have negatively impacted the company's current earnings.We reduced our holdings in CARBO but not by enough to significantly mitigate the impact of short term negative fundamentals.We continue to believe that the company's proppant has superior characteristics to its competition which should help this business recover over the long term as shale oil and gas drilling increases. (Jamie Stone)

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