Baron Capital, an investment management company, released its first quarter 2026 investor letter for its “Baron SMID Cap EFT”. This is the first full quarter of results for Baron SMID Cap ETF (BCSM). A copy of the letter can be downloaded here. Baron SMID Cap ETF focuses on investing in small, fast-growing businesses that demonstrate significant long-term growth potential, possess durable competitive advantages, have exceptional management teams, and offer compelling valuations. The Fund declined 10.56% (NAV) in the first quarter, underperforming the Benchmark, the Russell 2500 Growth Index, which declined 3.52%. During this quarter, investors gravitated towards a select few companies benefiting from artificial intelligence (AI) spending, referred to as “AI winners,” while selling off those considered “losers.” This created a challenging environment for bottom-up investors, as market prices diverged from fundamental values. This disconnect, combined with the onset of conflict in Iran, impacted the portfolio’s performance during the quarter. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Baron SMID Cap EFT highlighted stocks like Flutter Entertainment plc (NYSE:FLUT). Headquartered in New York, New York, Flutter Entertainment plc (NYSE:FLUT) is a leading gambling and sports betting company. On June 3, 2026, Flutter Entertainment plc (NYSE:FLUT) closed at $100.70 per share. One-month return of Flutter Entertainment plc (NYSE:FLUT) was -0.49%, and its shares lost 58.50% over the past 52 weeks. Flutter Entertainment plc (NYSE:FLUT) has a market capitalization of $17.46 billion.
Baron SMID Cap EFT stated the following regarding Flutter Entertainment plc (NYSE:FLUT) in its Q1 2026 investor letter:
“Shares of Flutter Entertainment plc (NYSE:FLUT) the world’s largest online sports betting and gaming operator that owns FanDuel, detracted during the quarter and we exited our position. FanDuel’s handle decelerated during the fourth quarter as an extraordinary NFL hold rate created recycling headwinds that persisted longer than expected. The impact of unfavorable customer outcomes was compounded by ill-timed promotional reinvestment that failed to re-engage customers. As a result, trends in early 2026 have remain challenged. The market further discounted the stock on a $300 million prediction markets investment embedded in 2026 guidance with no offsetting revenue.”
Flutter Entertainment plc (NYSE:FLUT) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 57 hedge fund portfolios held Flutter Entertainment plc (NYSE:FLUT) at the end of the first quarter, compared to 79 in the previous quarter. While we acknowledge the risk and potential of Flutter Entertainment plc (NYSE:FLUT) 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 Flutter Entertainment plc (NYSE:FLUT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Flutter Entertainment plc (NYSE:FLUT) and shared the list of best sin stocks to buy. In addition, please check out our hedge fund investor letters Q1 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.
