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 stocks such as Encompass Health Corporation (NYSE:EHC). Based in Birmingham, Alabama, Encompass Health Corporation (NYSE:EHC) is a leading operator of inpatient rehabilitation services. On February 5, 2026, Encompass Health Corporation (NYSE:EHC) stock closed at $99.56 per share. One-month return of Encompass Health Corporation (NYSE:EHC) was 3.27%, and its shares are down 0.30% over the past twelve months. Encompass Health Corporation (NYSE:EHC) has a market capitalization of $10.028 billion.
Baron Health Care Fundstated the following regarding Encompass Health Corporation (NYSE:EHC) in its fourth quarter 2025 investor letter:
“Encompass Health Corporation (NYSE:EHC) is a national leader in post acute health care services and the largest owner and operator of inpatient rehabilitation facilities (IRFs) in the U.S. Shares declined following disappointing third-quarter same-store discharges, which we attribute to difficult comparisons and the timing of new hospital openings. We believe this was an anomaly and expect trends to normalize with bed additions in the fourth quarter and into 2026. Notably, EBITDA increased 11% on relatively in line revenue, reflecting strong cost control, with labor efficiency standing out. Results beat Street expectations, and management raised 2025 guidance. Given sustained demand for rehabilitation services, management increased its new-bed growth outlook to approximately 4% annually—adding more than 550 beds in 2026 and roughly 500 in 2027—and expressed confidence in achieving total volume growth of 6% to 8%. We remain constructive on Encompass Health given its positive fundamentals, driven by demographic tailwinds, a strong market position, expanding hospital joint venture opportunities, and robust cash flow generation.”
Encompass Health Corporation (NYSE:EHC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 50 hedge fund portfolios held Encompass Health Corporation (NYSE:EHC) at the end of the third quarter, up from 49 in the previous quarter. While we acknowledge the risk and potential of Encompass Health Corporation (NYSE:EHC) 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 Encompass Health Corporation (NYSE:EHC) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Encompass Health Corporation (NYSE:EHC) and shared the list of best healthcare stocks to buy and hold for five years. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.
READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.
Disclosure: None. This article is originally published at Insider Monkey.
