Baron International Growth Fund: Latest Insights and Commentary

CONTRIBUTORS

• Agilent Technologies, Inc. is a global provider of instruments, software, consumables, and services spanning life sciences, diagnostics, and applied chemical laboratories. Shares rose after fiscal third-quarter results handily beat expectations and the company raised its full-year guidance. Results benefited from strong biopharmaceutical spending, growing GLP-1-related demand, and a broad slate of new products that exceeded expectations, while orders tied to pharmaceutical reshoring began arriving ahead of schedule. We retain conviction in Agilent, as its large installed base, margin expansion, and diversified product launch cadence position the company well to benefit from a recovery in the life sciences tools market.
• Mitsubishi UFJ Financial Group, Inc. (MUFG), a leading Japanese banking and financial services group, contributed to performance as investors grew more confident that Japan’s move toward normalized interest rates is producing stronger, more sustainable earnings. Fiscal first-quarter profit rose 48% year-over-year to ¥809 billion, beating expectations, while the domestic loan spread widened from 0.95% to 1.15% on higher rates and healthy loan demand. Results also benefited from a ¥222 billion contribution from MUFG’s stake in Morgan Stanley, along with higher trading revenue and asset management fees. Expectations for additional rate hikes strengthened the outlook for loan margins, while the solid quarter helped MUFG participate in the broader rally in Japanese bank stocks. We continue to find MUFG attractive, as further rate normalization and improving loan demand should drive additional margin expansion and earnings growth.
• Shares of leading Greek bank Piraeus Bank S.A. rose during the quarter, significantly outperforming the broader Greek banking sector on strong fundamentals, credit rating upgrades, and an index reclassification. On July 29, the bank reported record first-half 2026 net profit and a 16% return on tangible book value, with better-than-expected net interest margin and accelerating loan growth. Management subsequently raised its 2026 net interest income guidance. Investment-grade ratings from all major rating agencies further strengthened confidence in the bank’s financial profile and supported share-price gains in July. A second leg of the rally followed in September, when Stoxx’s reclassification of Greece as a developed market took effect, resulting in Piraeus’s inclusion in the STOXX® Europe 600 Index. This structural demand catalyst attracted substantial passive and active fund inflows. Together, these developments built on an already favorable backdrop of accelerating earnings momentum, an improving credit profile, and growing capacity to deliver shareholder returns.

DETRACTORS

• South Korean semiconductor company SK hynix Inc. is a leading manufacturer of advanced memory chips. Shares declined sharply amid a broader sell-off in memory stocks as second-quarter results missed lofty forecasts, even as revenue more than tripled year-over-year and operating margin reached a record 76%. The shortfall was partly due to shipments of HBM4 high-bandwidth memory for AI chips slipping into later quarters. Management responded by launching a 40 trillion won share buyback and cancellation program in August and pledging to return more than half of cumulative free cash flow through 2027, with long-term agreements with around 10 key customers adding revenue visibility. We retain long-term conviction in SK hynix given its position as the current leader in high-bandwidth memory, large net cash position, and growing base of contracted customers.
• Tokyo Electron Limited is a Japanese semiconductor equipment company with leading positions in deposition, etch, and cleaning tools used in chip manufacturing. Shares declined during the quarter as chip-equipment stocks proved particularly sensitive to concerns about the durability of AI spending. Tokyo Electron’s underlying results remained strong. Fiscal first-quarter sales and gross profit reached record levels, management raised its outlook for the wafer-fab-equipment market on strong AI data center demand, and the company declared a record interim dividend while continuing a sizable share buyback. Even so, shares were swept into a sharp late-July sell-off in Japanese AI stocks ahead of big-tech earnings, while chip-equipment stocks globally came under renewed pressure in September amid calls to pace the development of frontier AI. We retain conviction in Tokyo Electron as a core long-term holding. We view its exposure to rising process intensity in advanced logic and high-bandwidth memory, together with strong capital returns, as durable advantages supporting multi-year earnings growth.
• Chinese chip-design company Montage Technology Co., Ltd. is the world’s largest supplier of memory-interface chips, which enable high-speed communication between server processors and memory. Shares fell due to a company-specific overhang despite continued fundamental strength. In July, South Korean prosecutors opened an investigation into suspected price coordination involving Montage and two competitors. Montage said it is cooperating fully, and no charges have been filed. Meanwhile, the business continued to accelerate, with first-half revenue growing 27% year-over-year and second-quarter revenue increasing 33%, ahead of expectations. Rising adoption of DDR5, the latest generation of server memory, lifted shipments of newer-generation memory-interface chips, while emerging products supporting high-speed server connectivity and data movement continued to gain traction. Alongside these positive developments, the company proposed a share buyback. We retain long-term conviction and continue to view Montage’s leading market share, rising interconnect content per AI server, and broadening product portfolio as durable advantages supporting multi-year earnings growth.

The Quarterly Attribution Analysis for period ending September 30, 2026, is not yet available.