Baron Small Cap Fund is Excited to Invest in Hinge Health (HNGE). Here’s Why

Baron Funds, an investment management company, released its “Baron Small Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter of 2025, the fund was up 10.38%% (Institutional Shares) compared to the Russell 2000 Growth Index’s (the Index) 11.97% return. Year to date, the Fund is up 0.36% compared to the index’s (0.48)% return. Small-cap stocks recovered well during the quarter and performed in line with the overall market but have significantly trailed larger-cap stocks this year. 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 Small Cap Fund highlighted stocks such as Hinge Health, Inc. (NYSE:HNGE). Hinge Health, Inc. (NYSE:HNGE) is a health care software developer for joint and muscle health. The one-month return of Hinge Health, Inc. (NYSE:HNGE) was 18.26%. On August 8, 2025, Hinge Health, Inc. (NYSE:HNGE) stock closed at $56.68 per share, with a market capitalization of $4.422 billion.

Baron Small Cap Fund stated the following regarding Hinge Health, Inc. (NYSE:HNGE) in its second quarter 2025 investor letter:

“We established a position at Hinge Health, Inc. (NYSE:HNGE) on its May IPO. Hinge Health is a digital health care provider delivering virtual physical therapy, leveraging AI empowered software and hardware designed to deliver a broad spectrum of musculoskeletal (MSK) care. Four times larger than its next competitor, Hinge Health’s highly scalable platform facilitates personalized and largely automated MSK care through AI powered motion tracking (TrueMotion) and an FDA approved proprietary nerve simulation wearable device (Enso) supported by a care team of licensed Physical Therapists, MDs, and board-certified coaches.

MSK conditions are a leading driver of health care costs in the U.S., affecting about 40% adults. Only 9% of U.S. adults with MSK pain seek physical therapy treatment. Digital MSK treatment can help address this underserved market of pain management for the untreated, while offering a more cost-effective care option than the surgical alternative, Hinge Health offers a free-to-employee (no copay), easy-to-use, convenient virtual solution….” (Click here to read the full text)

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A female doctor using the latest healthcare IT technology in her medical practice.

Hinge Health, Inc. (NYSE:HNGE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. While we acknowledge the risk and potential of Hinge Health, Inc. (NYSE:HNGE) 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 Hinge Health, Inc. (NYSE:HNGE) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Hinge Health, Inc. (NYSE:HNGE) and shared the list of stocks Jim Cramer discussed recently. 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.