Baron Discovery Fund Sold RH (RH) due to Heightened Risk and Uncertainty

Baron Funds, an investment management company, released its “Baron Discovery Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund was up 14.76% (Institutional Shares), outperforming the 11.97% return for the Russell 2000 Growth Index. The fund was up 7.68% year-to-date, well ahead of the Index’s -0.48% return.  In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Baron Discovery Fund highlighted stocks such as RH (NYSE:RH). RH (NYSE:RH) is a retailer and lifestyle brand in the home furnishings market. The one-month return of RH (NYSE:RH) was 0.33%, and its shares lost 24.68% of their value over the last 52 weeks.  On July 30, 2025, RH (NYSE:RH) stock closed at $207.72 per share, with a market capitalization of $3.891 billion.

Baron Discovery Fund stated the following regarding RH (NYSE:RH) in its second quarter 2025 investor letter:

“Shares of luxury home furnishings retailer RH (NYSE:RH) faced significant volatility during the quarter and detracted from performance. The heightened volatility was due in large part due to increased uncertainty related to tariffs as the company imports a large percentage of its products. At the same time, the home furnishings industry remains under pressure due to lessened housing activity related to high interest rates and macroeconomic uncertainty. Despite having conviction in RH’s long-term growth prospects, because of the heightened risk and uncertainty we exited our position.”

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A mid-sized warehouse filled with furniture and home appliances.

RH (NYSE:RH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 46 hedge fund portfolios held RH (NYSE:RH) at the end of the first quarter, which was 51 in the previous quarter. While we acknowledge the risk and potential of RH (NYSE:RH) 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 RH (NYSE:RH) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered RH (NYSE:RH) and shared billionaire Kerr Neilson’s stock picks with huge upside potential. In addition, please check out our hedge fund investor letters Q2 2025 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.