Baron Funds, an investment management company, released its fourth-quarter investor letter for the “Baron Health Care Fund”. A copy of the letter can be downloaded here. The fund rose 13.10% (Institutional Shares) in the quarter, compared to a 11.92% gain for the Russell 3000 Health Care Index (benchmark) and a 2.40% gain for the Russell 3000 Index (the Index). The Fund returned 10.28% for the full year, compared to 14.56% and 17.15% gains for the indexes, respectively. Strong stock selection in biotechnology contributed to the Fund’s relative gains in the quarter. The Fund seeks to invest in businesses with secular growth opportunities, a sustainable competitive edge, and strong management. The firm believes that healthcare is a strong sector in the U.S. economy, offering attractive investment opportunities with positive momentum heading into 2026. Please review the Fund’s top five holdings to gain insights into their key selections for 2025.
In its fourth-quarter 2025 investor letter, Baron Health Care Fund highlighted Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) as a new addition to the portfolio. Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is a biotechnology company that focuses on developing treatments for dermatological diseases. On February 5, 2026, Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) stock closed at $26.07 per share. One-month return of Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) was -7.62%, and its shares are up 124.55% over the past twelve months. Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) has a market capitalization of $3.193 billion.
Baron Health Care Fundstated the following regarding Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) in its fourth quarter 2025 investor letter:
“We bought shares of Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT), a biotechnology company that sells Zoryve cream and foam for the treatment of autoimmune dermatologic conditions. Topical Zoryve is used for patients with mild-moderate disease and can be used in combination with biologic treatments (such as Dupixent and Rinvoq) for moderate-severe disease. The standard of care for these patients today is intermittent courses of steroids. Zoryve appears to have similar efficacy to steroids, but has fewer side effects and can be used chronically in a simple daily regimen. Although topical dermatology drugs have historically had a tough time securing good insurance access, Arcutis launched Zoryve at a reasonable price and payers have recognized the value Zoryve provides, and 80% of patients with commercial insurance now have access. In total, Zoryve’s current approved indications target 30 million patients in the U.S., of which 19 million have already been prescribed a topical medication. Assuming moderate adoption (20% to 25% share of topical prescriptions) within the segment of physicians that Arcutis targets gets us to $3 billion plus of peak sales. Arcutis is already free cash flow positive and should see meaningful operating leverage in the coming years. With 90% gross margins, Arcutis should ultimately generate very high operating margins.”
Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 35 hedge fund portfolios held Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) at the end of the third quarter, up from 32 in the previous quarter. While we acknowledge the risk and potential of Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) 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 Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Arcutis Biotherapeutics, Inc. (NASDAQ:ARQT) and shared the list of stocks soaring by double digits. In addition, please check out our hedge fund investor letters Q4 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.
