Dear Baron Energy And Resources Fund Shareholder:
Performance
In our 2014 year-end letter we characterized the year with the Dickens quote, “It was the best of times, it was the worst of times.” As we look back at 2016, we would rework that quote and say that 2016 was “the worst of times and it was the BETTER of times.” We do not think 2016 was the best of times because we believe that even better times are ahead for our energy and resource-related companies over the next several years. It is our view that in 2016 we saw the bottom of the energy recession that began in 2014, as well as the beginning of a potential multi-year cyclical recovery. Oil prices and equity prices bottomed in February 2016 and oilfield activity, investment, and earnings bottomed in the middle of the year. In addition, we also saw price bottoms in industrial and precious metals and a variety of other commodities during 2016, which coupled with the recovery in oil and natural gas prices, led to robust stock performance across much of the energy and resource-related landscape in 2016. We will cover our outlook in more detail later in this letter but in short: as we look into 2017, we are seeing more bullish signs for accelerating economic growth, which combined with the major policy shift enacted by OPEC in the fourth quarter, will lead to an oil market in which demand exceeds supply and inventory draw-downs create tailwinds for higher prices than we have experienced in recent years. This bullish backdrop is expected to lead to rising cash flows for energy companies and rising levels of capital investment for the first time since 2014. Investment will be most pronounced in North America, where short-cycle unconventional oil development projects will garner the lion’s share of incremental investment; while international and offshore oil & gas-related investments remain challenged. This should create a more fertile operating environment for nearly any company operating in the energy value chain in North America including exploration & production companies; oilfield service, equipment and drilling companies; midstream service providers; and refining & marketing companies.
benchmark (S&P North American Natural Resources Index) by 256 basis points for the year and 126 basis points for the fourth quarter. All of the relative underperformance is attributable to poor performance on an absolute and relative basis for virtually the entire portion of the portfolio that was NOT invested in Energy this year and this past quarter. To put a fine point on this, our energy-related investments posted a net contribution for the year of 32.23% compared to gains of 23.34% for our benchmark. However, we generated relative underperformance in Industrials, Consumer Discretionary, Alternative Energy, and especially in Materials, which was the source of the biggest negative variance. Materials stocks in general had a very good year, especially metals & mining (including precious metals and industrial metals), and construction materials. We were underweight Materials all year, which hurt when mining & metals soared in the first half and once again when construction materials stocks got a big boost after the U.S. Presidential election on the prospects of fiscal stimulus and a big infrastructure package. We also suffered from poor stock picks and poor timing in the sub-industries that make up Materials. This was particularly true with the fourth quarter performance of one of our larger holdings in this area–Flotek Industries, Inc., which declined sharply in the fourth quarter following the publication of a short report that called into question the efficacy of the company’s main chemical product. Our research and analysis contradicts what was published in that report, but Flotek’s price decline nevertheless had a meaningful impact on the Fund’s performance in the quarter and for the year overall.
On the bright side, we are pleased with the significant success we had investing in the Energy sector in 2016. We came into the year with a substantial cash position of approximately 15%, which was a help early in the year when oil and stock prices were bottoming. The purchases that we made in the first half of the year as we worked that cash down proved to be excellent buys. For example, we established new positions in companies such as Rice Energy Inc., Encana Corp., U.S. Silica Holdings, Inc., and Targa Resources Corp., all of which were among the top 10 contributors to our Fund’s performance for the year and continued to be meaningful holdings at year end. In addition to the performance of these portfolio additions, three of our top five positions throughout the year were our core investments in high quality exploration & production companies, with a focus on the Permian Basin in West Texas. These three companies were also among the most significant contributors to the Fund’s performance in 2016, and we believe they continue to hold significant potential for gains over the next several years. Our investments in the Permian Basin are a reflection of our commitment to long-term investing, as we have held large stakes in Permian-based producers since the inception of this Fund and essentially since I joined Baron Capital seven and a half years ago. Our interest in the Permian Basin revolves around our view that despite being a leading source of U.S. oil production for the past 70 years, the shift toward unconventional drilling and completion technology is still nascent and the resource has a lot of room for growth. The number of economic formations and the recovery rate from each formation combined with above average expected growth rates in production over the next several years, should result in more value creation opportunities.
RSP Permian, Inc. (RSPP, Financial) is an independent exploration and production (E&P) company focused on the Permian Basin in West Texas. Shares rose in the fourth quarter after the company raised its production guidance, delivered strong quarterly results, and acquired Silver Hill Energy Partners in the core of the Delaware sub-basin in the Permian. We believe shares will benefit from improvements in operating results and prudent cost management as the company generates peer-leading production growth and integrates the acquired Silver Hill properties in the Delaware Basin.
Encana Corp. (ECA, Financial) is an E&P company with operations in Western Canada and Texas. The stock rose in the fourth quarter after Encana reported production guidance that beat Street expectations, a solid multi-year growth outlook, and lower cash costs. Encana has strong positions in two of the more attractive oil plays in the Permian and Eagle Ford Basins and two of the lowest cost natural gas basins in Western Canada. We believe Encana is one of the most attractively valued E&P companies with strong long-term growth and returns potential.
Halliburton Co. (HAL, Financial) is one of the largest diversified oilfield service and equipment companies in the world. Shares increased in the fourth quarter as the company reported strong earnings on lower costs and margins in North America that beat Street expectations. Shares also rallied after OPEC’s decision to cut output. We believe Halliburton has a market-leading position in North American unconventional plays and is the best positioned company to benefit from the ongoing recovery in onshore well completion activity.
Shares of Valero Energy Corporation (VLO, Financial), the largest independent refining & marketing company in the U.S., rose on solid third quarter results driven by lower operating costs and reduced capital budget guidance. Shares also rallied on post-election sentiment that positive regulatory changes will help with rising Renewable Identification Number costs. Valero has produced strong free cash flow and returned cash to shareholders through dividends and share repurchases that we believe will result in a potentially higher share price over the next several years.
Targa Resources Corp. (TRGP, Financial) has a prime gathering and processing footprint in low cost oil and gas basins (specifically the Permian Basin) and the Gulf Coast. Shares of this midstream energy company rose during the fourth quarter on recovering commodity prices after OPEC signed a deal to cut production. We believe this deal will translate into better visibility, volumes, and operating leverage for Targa, allowing it to stabilize its dividend and improve its coverage ratio, and explore potential avenues for growth through better utilization and footprint expansion.
Flotek Industries, Inc. (FTK, Financial) supplies chemical additives to the global oil and gas industry. It has a proprietary product (CnF) that helps increase oil and gas shale well productivity. Shares fell in the fourth quarter following a short seller’s assertion that independent consultant studies commissioned by Flotek were based on incomplete data and failed to consider key variables. After incorporating additional data, the consultant confirmed its conclusion that CnF improves well productivity. We expect shares to rebound as Flotek proves demand for CnF remains solid.
Rice Energy Inc. (RICE, Financial) is an independent E&P company focused on the Marcellus and Utica shales in Pennsylvania and Ohio. Shares declined in the fourth quarter due to a weakening natural gas outlook and higher exposure to Appalachia in-basin pricing following Rice’s acquisition of Vantage Energy. We believe Rice offers exposure to some of the best acreage and industry-leading production growth. We also think that the market underappreciates the value of Rice’s midstream holdings.
Newfield Exploration Co. (NFX, Financial) is an independent E&P company focused on shale oil fields in Oklahoma, Utah, and North Dakota. Shares fell in the fourth quarter after the company reported quarterly results that fell short of analyst expectations despite raised production guidance and increased activity in its highest return assets in Oklahoma. We like shares at these prices and believe there is more upside to resource potential and opportunities for Newfield to sell non-core assets to accelerate development of its higher return assets.
SolarEdge Technologies, Inc. (SEDG, Financial) is a leading provider of DC optimizers and inverters for residential and commercial solar systems. The share price fell in the fourth quarter on investor concerns around sluggish residential market growth as a result of changing purchase behavior and slowing growth of the largest installers. New competitors are looking to penetrate the U.S. market in 2017, suggesting amplified pricing pressure above market expectations and potentially lost market share for SolarEdge. We exited our position.
Shares of specialty chemical company Kraton Corporation (KRA, Financial) decreased in the fourth quarter as management reduced fiscal year guidance again. We believe the reduction was due to exogenous, temporary factors, leaving our long-term thesis intact. We think the company is on track to execute its plan to grow earnings through cost savings, acquisition synergies, and organic growth, while generating significant free cash to delever the balance sheet, accruing value to equity holders.
Portfolio Structure
We ended the year with 0.6% cash, which continues to reflect our desire to run the Fund at a fully invested level that reflects our optimism about the forward outlook for the industries and companies in which we invest. The Fund remains concentrated, with the top 10 holdings representing 46.5% of the Fund at year end, down slightly from the end of the third quarter. Our level of concentration is consistent with our strategy of having a high active share and being a long-term investor in the companies in which we choose to invest. Our active share at year-end 2016 was 82.05%. Our three-year average turnover ratio was still 41.6%, even though we engaged in a higher than normal amount of turnover in the Fund in the past 12 months, as we harvested losses at year-end 2015 and refocused the Fund into a more concentrated, higher conviction portfolio. We believe that our commitment to detailed company research, high active share, and low turnover could potentially lead to superior results over the long term for our investors.
At the end of the year, the portfolio breakdown in the key sub-industries was as follows:
Oil & Gas Exploration & Production: The E&P sub-industry represented 47.5% of the Fund at the end of the quarter, and continued to be focused on North American-based producers that operate primarily in developing unconventional oil & gas reservoirs. Companies that primarily operate in the Permian Basin in Texas and New Mexico are our largest focus for E&P investments, followed by companies that are focused on the Anadarko Basin in Oklahoma, the Appalachian Basin in Pennsylvania/Ohio, and the Western Canadian Sedimentary Basin. These plays are characterized by multiple pay-zones, industry-leading returns, and expanding resource potential, and stocks such as RSP Permian, Inc., Parsley Energy, Inc., Concho Resources, Inc., Encana Corp., and Newfield Exploration Co. are key investments in these plays and were key contributors to our performance this year and this quarter. We continue to be bullish on the long-term growth potential of these four plays and the companies that are the leading developers in each.
Oil & Gas Storage & Transportation: This sub-industry, which is a mix of MLPs, publicly traded general partnerships, and C-Corp structured companies that own and operate critical oil & gas processing, and storage and transportation infrastructure, is the second largest sub-industry for the Fund and it represented 18.8% of the Fund’s assets at the end of the quarter. We continued to see improving conditions in this sector, particularly for storage and transmission related companies. Many companies in this sub-industry have undergone financial and strategic restructurings in the last 12 months, resulting in stronger balance sheets and streamlined corporate structures. In addition to these actions, a more positive outlook for commodity prices has also eased investor concerns about future dividend/distribution growth, enhancing the relative valuation comparison for these stocks versus other yield-oriented investments like Utilities, REITs, and Consumer Staples. As a result, investment flows into dedicated MLP/midstream funds have picked up over the past six months and the increase in investment flows has also coincided with declining capital needs as a result of slower organic growth. The reduction in capital needs along with a series of M&A transactions have reduced the supply of equity, which we view as a positive for our investments in this area.
Oil & Gas Equipment & Services & Drilling: At 16.5%, our exposure to these related sub-industries was up again in the fourth quarter due primarily to share price appreciation and some modest purchases. The equipment and service companies that we added to the portfolio in the third quarter and were referenced in last quarter’s letter were all solid contributors to the Fund’s performance in the past quarter. As expected, the outlook for a recovery in oilfield drilling and completion activity in North America is brightening as a result of the increase in oil prices, and even at this early stage of recovery we are beginning to see the green shoots of pricing improvement that along with activity growth should lead to accelerating earnings gains over the course of the next several years. We continue to harbor concerns about valuation and normalized earnings power in this sub-industry, but we are more comfortable that the restructuring of the past two years could result in a more positive earnings recovery than is currently embedded in consensus estimates and in consensus valuations.
Renewable Energy: Renewable or alternative energy is not a specific GICS sub-industry, but we think this is really the appropriate classification for our investments in the Utilities and Information Technology sectors, since our investments in these two areas are primarily companies involved in the construction and operation of solar and wind electricity generation assets and battery storage systems. Investments in this area accounted for 7.8% of the Fund at the end of the quarter, and performance was mixed for the quarter and for the year. Our ongoing investment in Tesla Motors, Inc. and our new purchase of Infraestructura Energetica Nova S.A.B. de C.V. were positive contributors during the fourth quarter, while our holdings in TerraForm Power, Inc. and TerraForm Global, Inc. were modest detractors and continue to be dominated by the ongoing Chapter 11 process for their parent company SunEdison. Third-party investors have expressed interest in buying part or all of both companies in recent months and a path forward for both of these entities could become significantly clearer in the next several months.
Materials: We reduced our exposure to the Materials sector as we exited our gold positions following the U.S. election and redeployed that capital in areas that we thought would be more productive. In addition, performance among our ongoing Materials investments was negatively impacted by poor performance in the quarter for companies such as Flotek Industries, Inc. and Kraton Corporation, which also reduced the size of our holdings in this sub-industry. At quarter end, Materials represented only 5.9% of the Fund.
Oil & Gas Refining & Marketing: Independent refiners represented 2.9% of Fund assets at the end of the quarter. We trimmed exposure amid concerns about margins and tax policy following the outcome of the U.S. election. Our exposure is well below the 7.4% average weight for this sub-industry in our benchmark. We are cautious in the near term that rising oil prices will hurt refiner input costs and that the net effect of potential regulatory and tax policy changes will be a net negative for the sub-industry overall, but could have a differential impact on various companies. Until we have more clarity on the direction of regulation and policy, we see better opportunities elsewhere.
With the exception of Nabors Industries Ltd., where we added to the purchases we made in the third quarter, all of our top purchase activity in the quarter were the result of initiating new positions. The largest new position initiated in the fourth quarter was our investment in WPX Energy, Inc. WPX is a U.S.-based independent E&P company that is primarily focused on growing its production in two principal plays–the Bakken shale in North Dakota and the Wolfcamp shale in the Delaware sub-basin of the greater Permian Basin. As such, our purchase of WPX added to the Fund’s growing exposure to Permian-oriented E&P companies, as the company successfully entered the basin over a year ago through a well-timed acquisition in the core of the play. Our assessment of early well results indicates that WPX’s position in the Delaware is one of the best in the industry. It has the potential for multiple development zones and higher-than-average rates of recovery that we think will lead to faster growth and higher returns than currently anticipated by the Street. We have also been impressed with progress and success that WPX’s management team, which took over the company in 2014, has made in reshaping its asset portfolio and see additional steps that can be taken to further optimize the asset base. We view WPX as a company that has successfully repositioned itself with top-tier assets in the aforementioned plays and a capital structure that should enable it to achieve top-tier growth in oil production, cash flow, and net asset value.
Jones Energy, Inc. (JONE, Financial) is a small-cap independent E&P company that has a proven track record of low-cost operations and development success in the western Oklahoma/Texas Panhandle region. While the company’s historical asset base has generated solid returns for the company over the years, we view Jones in a similar vein as WPX in that the investment thesis revolves around the potential for a successful transition into a new play that could result in accelerating production, growth and net asset value creation. In the last year, the company bought into an acreage position in South Central Oklahoma that sits in the Anadarko Basin and lies between the two most interesting oil development plays in Oklahoma called the SCOOP and the STACK. This area between the two plays has been dubbed the “Merge” by several industry analysts and shares a similar geological makeup as portions of the SCOOP and STACK, both of which are considered to be among the most economic emerging oil shale plays in the U.S. The industry has drilled fewer wells testing the productivity of the “Merge” and Jones has not released any of its own well results yet. However, the initial data on well productivity that has been released by other operators indicate that the “Merge” could be an attractive and economic area for future development. Based on our risked analysis of Jones’ current asset base and prospective opportunity in the “Merge,” we think that this company offers one of the highest reward opportunities even in a flat oil price environment. However, due to the company’s smaller market cap, somewhat more leveraged balance sheet, and the more exploratory nature of its asset base, we have sized this new position to reflect both the upside opportunity as well as the higher risks.
Sanchez Production Partners LP is a small-cap midstream company that principally gathers and processes oil, natural gas, and gas liquids in the Eagle Ford shale for its majority shareholder, Sanchez Energy Corp. The company has been expanding its logistics footprint through a combination of acquisitions and organic capex investment in gathering, processing, and transportation infrastructure to serve the growing production profile of its parent company better. We believe that the combination of recent acquisitions and ongoing investments will enable the company to grow its distributable cash flow and distributions to shareholders at a 6% to 10% rate over at least the next three years and a recent large acquisition by Sanchez Energy in the Eagle Ford could result in higher production growth rates that lead to additional transport and processing opportunities for this MLP and meaningfully extend the runway for future growth. In our view, the company’s current valuation does not reflect any future growth in distributions and even looks inexpensive if the company maintains its current rate of distributions, which at a $1.70/share annualized, has the company yielding almost 15% compared to comparable companies that are yielding
closer to 5%. Some portion of this valuation discrepancy can be attributed to Sanchez Production Partners having higher risks and lower long-term visibility than some peer companies that are related to larger more diversified E&P companies. However, we think the current discount and the visibility on capital returns over the next several years significantly mitigates these risks and creates an opportunity for significant upside reward.
We initiated a position in Infraestructura Energetica Nova S.A.B. de C.V. (IEnova) (MEX:IENOVA) because we believe the company will continue to benefit from privatization efforts occurring in Mexico’s Energy sector. IEnova, originally Sempra Energy’s Mexican unit, was one of the first private companies to build and acquire natural gas pipelines following the earliest reforms in 1996. We believe this operating experience puts IEnova in a great position to partner with a growing number of energy producers as exploration projects are auctioned to global participants and with consumers seeking to build and operate renewable energy assets. IEnova’s business is built upon a diverse set of assets with long-term, take-or-pay and primarily dollar-denominated contracts providing stable and predictable cash flow. We believe the company can double its asset base and cash flow over the next several years based on its current portfolio of contracts and sanctioned development projects. Longer term, the opportunities to expand by acquiring the rights to build gas pipelines, power generation and distribution assets, and storage infrastructure should provide additional opportunities for profitable growth.
Our largest net sale in the quarter was Rice Energy Inc. (RICE, Financial). We decided to take profits and reduce the size of the position because the rapid appreciation in the shares this year brought the stock much closer to our target price and diminished the upside on an absolute and relative basis. We exited our position in SolarEdge Technologies, Inc. during the fourth quarter as the competitive risks that plagued the shares in the third quarter became even more of an imminent threat. We decided to redeploy those assets into better risk/reward opportunities as discussed above. We exited our position in Marathon Petroleum Corp. (MPC) due to growing fundamental concerns about the net effect of changes in the regulatory/policy environment post-election. However, given that Marathon subsequently became the target of activist investor Elliott Management, this proved to be a poor decision as we left money on the table. Parsley Energy, Inc. (PE) shows up on the list of top net sales for the quarter due to the fact that the Fund experienced a redemption in mid-December equal to about 7% of our AUM, prompting us to sell a portion of many of the stocks in the portfolio. Given the fact that Parsley was our largest position on average during the quarter, the redemption sales were largest in Parsley in dollar figures. Parsley remains a top position in the Fund and is an investment that we think still has an attractive risk/reward outlook over the next several years.
Outlook
Our outlook for investing in Energy in 2017 remains pretty optimistic and very similar to what we wrote about last quarter. We think there are three key messages that investors should think about as it pertains to investing in Energy over the next two to three years.
- The worst Energy recession in a generation is over.
- The U.S. Energy renaissance is alive and well.
- Equity investors remain significantly underweight in their exposures to the Energy sector and, to a lesser extent, resource-related businesses.
Clearly, after a difficult start, 2016 proved to be a very good year to be invested in the Energy sector, but we believe this is just the beginning of what we think will be a new upcycle that could continue for several more years. The macro setup for Energy is pretty good. The oil market has returned to balance and OPEC is intent on accelerating a rebalancing such that inventories return to normal. Oil demand has posted stronger-than-trend growth for several years despite disappointing economic growth. Global economic policies and priorities appear to be changing with increased priority to fiscal stimulus and not just monetary stimulus. The recent rise in interest rates seems to signal a move from a deflationary environment to an inflationary environment, and we think that the lack of inflation and fears of deflation in the 2011-2015 period was a big headwind for investing in commodities in general and energy in particular. The reappearance of even modest inflation should be seen as a good sign for investors in these areas. While it is still difficult to predict what will result from the outcome of the U.S. election in terms of exact policies, it does appear that the combined effect of changes being proposed or expected in taxation and regulation will be more of a tailwind than a headwind for the Energy sector.
Energy remains a cyclical industry with pockets of secular growth, and we continue to try to position the portfolio to benefit from a combination of recovery from the brutal recession of the last two years and the key trends that will shape the industry in the next several years. Those key trends will continue to be the development of unconventional oil and natural gas in North America, growing global natural gas demand, ongoing challenges facing non-OPEC, non-North American producers in offsetting natural production declines, and budgetary shortfalls among key global oil producers inside and outside of OPEC. All of these items will factor into the shape, size, breadth, and length of the nascent recovery and present us with opportunities and challenges over the next several years.
The Energy recession is over: We believe that the energy recession is over, that oil prices bottomed in early 2016 and have more risk to the upside than the downside. We are encouraged by the fact that the oil supply/demand balance has flipped from surplus to deficit since the middle of 2016, as seen in declining global inventories, and the prospects for a more rapid decline in inventories following the fourth quarter agreements by OPEC and key non-OPEC producers to further cut supply and return inventories to more normal levels. We are also enticed by the significant restructuring that has taken place across much of the energy industry in recent years to better align supply with demand and make companies more competitive. The industry has cut costs, closed excess manufacturing plants, pared non-core assets, reduced debt, been proactive in adapting to new technologies and adopting new business practices. All of these forces are expected to lead to improved operating efficiencies, higher normalized margins, and stronger growth for those companies that lead in the recovery.
U.S. Energy renaissance is alive and well: As we look at 2017 and beyond, we continue to believe that the best opportunities to profit from the recovery lie with U.S.-based E&P companies that have leading positions in shale plays where oil is the dominant commodity being sought and produced, such as those in the Permian and Anadarko Basins, for example. We think there is still considerable opportunity for these companies to benefit from growth in the ultimate size of the recoverable resource as more zones are delineated, spacing patterns are optimized, and completion techniques are fine-tuned. As a consequence, companies in these plays should post leading production and cash flow growth over the next several years and also see increases in net asset value. There has also been significant M&A activity in the domestic oil market in the past year with a combination of asset and corporate transactions that have improved the competitive positions of many of the companies in the Fund and helped to highlight their values as well. We expect that this will continue in 2017.
The improved fortunes of U.S. shale oil and natural gas producers in 2017 will also have positive knock-on effects for those companies that benefit from the growth in E&P capital investment (oil service, drilling, and equipment companies) and those companies that also stand to benefit from the reversal of U.S. production volume from the downward trend of the past year or more to a renewed upward trend (midstream gathering, processing, and transportation companies). We foresee that the recovery in the U.S. rig count that began last summer will continue in 2017 as a result of higher industry cash flows and increased access to capital markets. The improvement in drilling and subsequent completion activity will lead to an earnings rebound for oil service, drilling, and equipment companies with exposure to the U.S., while those with businesses that are more focused offshore or overseas will likely experience a slower recovery or none at all in the next 12 months. Oil and gas gathering, processing, and transportation companies should also experience higher throughput volumes and a demand for more investments in such capacity. The growth in volume and the renewed opportunity to invest capital should boost midstream earnings and distributions and set the stage for additional growth beyond 2017. These three areas of the energy industry (E&P, oil service, and midstream) are the dominant areas for investment in our Fund and are likely to stay that way in 2017 as the expected industry recovery unfolds.
Equity investors remain significantly underweight in their exposures to the Energy sector and, to a lesser extent, resource-related businesses:
Investor surveys continue to show that while institutional investors are less skeptical about the outlook for energy and resource-related stocks, and are less underweight than last year, they are still cautiously positioned toward these areas and remain underweight relative to historical norms. We think this means that there is still a significant amount of capital remaining on the sidelines that could be put to work in the areas in which the Fund invests. Furthermore, it is possible that index weightings will get revised upward over time, adding more pressure for both active and passive investors to get involved. The Energy sector has been one of the least correlated of the major sub-sectors of the S&P 500 Index to the overall performance of the S&P 500 Index over the past five years, so an allocation to a dedicated energy and resource fund may provide a differentiated return and diversification for investors.
I am pleased to have had the opportunity to share my thoughts with you in this letter. Thank you for having the confidence to join me in investing in Baron Energy and Resources Fund.
Sincerely,
James Stone
Portfolio Manager
The discussions of the companies herein are not intended as advice to any person regarding the advisability of investing in any particular security. The views expressed in this report reflect those of the respective portfolio manager only through the end of the period stated in this report. The portfolio manager’s views are not intended as recommendations or investment advice to any person reading this report and are subject to change at any time based on market and other conditions and Baron has no obligation to update them.
