Baron Capital, an investment management company, released its Q2 2026 investor letter for the “Baron Small Cap Fund.” Baron Small Cap Fund gained 12.57% (Institutional Shares) in the second quarter, trailing the Russell 2000 Growth Index’s 25.71% return. A copy of the letter can be downloaded here. U.S. equities rebounded sharply after March’s selloff related to the U.S.-Iran conflict, with AI infrastructure, semiconductors, and other technology stocks driving much of the market’s gains. Small caps also outperformed large caps, although performance remained concentrated in high-Beta and Momentum stocks, areas where the Fund has historically had less exposure. The Fund benefited from several AI-related and industrial holdings, but software and services stocks remained pressured by concerns that AI could disrupt their businesses. Looking ahead, management believes broader market participation, attractive small-cap valuations, improving industrial growth, and stronger earnings could support future returns despite continued uncertainty around oil prices, inflation, and interest rates. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Baron Small Cap Fund highlighted Floor & Decor Holdings, Inc. (NYSE:FND). Floor & Decor Holdings, Inc. (NYSE:FND) is a multi-channel specialty retailer of hard surface flooring and related accessories. On August 18, 2026, Floor & Decor Holdings, Inc. (NYSE:FND) closed at $56.05 per share. The one-month return of Floor & Decor Holdings, Inc. (NYSE:FND) was 3.41% and its shares gained 31.62% over the past 52 weeks. Floor & Decor Holdings, Inc. (NYSE:FND) has a market capitalization of $5.97 billion.
Baron Small Cap Fund stated the following regarding Floor & Decor Holdings, Inc. (NYSE:FND) in its Q2 2026 investor letter:
“We sold three positions during the quarter, with the largest disposal being Floor & Decor Holdings, Inc. (NYSE:FND) as existing home sales, a key driver for flooring demand, remain weak and we favor other ways to play a future housing recovery.”
Floor & Decor Holdings, Inc. (NYSE:FND) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held Floor & Decor Holdings, Inc. (NYSE:FND) at the end of the first quarter which was 47 in the previous quarter. While we acknowledge the risk and potential of Floor & Decor Holdings, Inc. (NYSE:FND) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Floor & Decor Holdings, Inc. (NYSE:FND) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Floor & Decor Holdings, Inc. (NYSE:FND) and shared Argosy Investors’ insight on the company. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
