Baron Capital, an investment management company, released its Q2 2026 investor letter for the “Baron Asset Fund”. A copy of the letter can be downloaded here. U.S. equities reached new highs in Q2, mainly driven by a narrow group of stocks benefiting from AI advancements, particularly in the Information Technology sector, with semiconductor stocks showing remarkable performance. The Baron Asset Fund rose 18.98% in the quarter, outperforming the Russell Midcap Growth Index’s 14.55% return, driven by positive stock selection, despite challenges from underexposure to strong Beta and Momentum factors. Although the Fund’s investment strategy limited exposure to high-flying sectors, its focus on undervalued software and services is expected to yield positive returns as market leadership diversifies. Concerns about AI disruption have led to unfair stock penalties in various sectors, reflecting investor concerns about legacy business models amidst rising valuations for AI beneficiaries. Additionally, reviewing the Fund’s top five holdings could help identify its best picks for 2026.
In its Q2 2026 investor letter, Baron Asset Fund highlighted Quanta Services, Inc. (NYSE:PWR). Quanta Services, Inc. (NYSE:PWR) is an infrastructure services company that provides engineering and construction services to utilities, energy infrastructure, and telecommunications projects, which contributed positively to the fund’s performance this quarter. On August 13, 2026, Quanta Services, Inc. (NYSE:PWR) closed at $672.78 per share. The one-month return of Quanta Services, Inc. (NYSE:PWR) was 7.04%, and its shares gained 76.67% over the past 52 weeks. Quanta Services, Inc. (NYSE:PWR) has a market capitalization of $101.15 billion.
Baron Asset Fund stated the following regarding Quanta Services, Inc. (NYSE:PWR) in its Q2 2026 investor letter:
“Quanta Services, Inc. (NYSE:PWR) is a leading specialty contracting company that provides comprehensive infrastructure solutions across the electric and gas utility, renewable energy, communications, pipeline, and energy industries. Shares rose during the quarter, driven by broad optimism around AI, data center and power infrastructure construction, as well as strong first quarter earnings that exceeded expectations across the board and prompted management to substantially raise full-year guidance. Management reiterated its view that the business can grow its earnings at a mid-to-high teens rate or better through at least the end of the decade, supported by secular trends including grid modernization, electrification, the energy transition, industrial reshoring, and communications infrastructure upgrades. We continue to believe this level of growth is achievable and take further comfort in Quanta’s 25% earnings CAGR since 2015, a period during which the market backdrop was considerably less favorable than it is today. We remain long-term shareholders in Quanta and continue to see compelling growth prospects for the business.”
Quanta Services, Inc. (NYSE:PWR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 94 hedge fund portfolios held Quanta Services, Inc. (NYSE:PWR) at the end of the first quarter, up from 90 in the previous quarter. While we acknowledge the risk and potential of Quanta Services, Inc. (NYSE:PWR) 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 Quanta Services, Inc. (NYSE:PWR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Quanta Services, Inc. (NYSE:PWR) and shared a list of stocks surpassing earnings expectations. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years.
Disclosure: None. This article is originally published at Insider Monkey.
