Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Health Care Fund”. A copy of the letter is available to download here. Baron Health Care Fund (the Fund) declined 6.97% (Institutional Shares) in the quarter, compared to the 4.88% decline for the Russell 3000 Health Care Index (the Benchmark) and the 3.96% decline for the Russell 3000 Index (the Index). The Fund appreciated 9.39% on an annualized basis since its inception, compared to the 8.97% gain for the Benchmark and the 13.26% gain for the Index. The disappointing stock selection drove the Fund’s underperformance in the quarter. Despite recent challenges, the Fund believes the long-term outlook for health care remains positive due to factors including an aging population, rising chronic disease rates, advances in biotechnology, and increased health care spending. 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 Health Care Fund highlighted stocks like Johnson & Johnson (NYSE:JNJ). Johnson & Johnson (NYSE:JNJ) is a leading global healthcare company that engages in the research and development, manufacture, and sale of a range of products in the healthcare field. On May 1, 2026, Johnson & Johnson (NYSE:JNJ) closed at $227.19 per share. One-month return of Johnson & Johnson (NYSE:JNJ) was -5.72%, and its shares gained 46.57% over the past 52 weeks. Johnson & Johnson (NYSE:JNJ) has a market capitalization of $546.9 billion.
Baron Health Care Fund stated the following regarding Johnson & Johnson (NYSE:JNJ) in its Q1 2026 investor letter:
“We increased the position in Johnson & Johnson (NYSE:JNJ), a large cap health care company with two segments, Innovative Medicine and MedTech. J&J has been actively optimizing its portfolio, separating and spinning off lower-growth and less attractive businesses and investing in higher growth, innovative businesses. This has led to a portfolio of businesses with accelerating growth, which we think justifies a higher multiple. For example, J&J spun off its consumer health business (along with talc-related liabilities) in 2023 into a new, independent company named Kenvue, and in October 2025, J&J announced plans to separate its orthopedics business into a new, independent entity named Depuy Synthes. J&J is now focused on the Innovative Medicine segments (focused on oncology, immunology, and neuroscience) and a growth MedTech business (focused on cardiology, robotic surgery, and vision). Management guidance for 2026 operational sales growth is roughly 6%, and could accelerate to double-digit revenue growth by the end of this decade. In the Innovative Medicine segment, key growth drivers include (among others): Tremfya, an injectable biologic treatment for patients with plaque psoriasis, psoriatic arthritis, Crohn’s disease and ulcerative colitis; Icotyde, a once daily oral peptide tablet recently approved for plaque psoriasis and being studied in psoriatic arthritis, ulcerative colitis and Crohn’s disease; Caplyta, a medication used to treat schizophrenia or along with an antidepressant to treat major depressive disorder, bipolar depression; Spravato, a nasal spray used along with an oral antidepressant to treat adults with treatment-resistant depression and major depressive disorder; Darzalex, a treatment for multiple myeloma, Tecvayli and Talvey, bispecific antibodies for adults with relapsed or refractory multiple myeloma; and Rybrevant, a bispecific antibody for adults with EGFR-mutated non-small cell lung cancer. In the MedTech segment, J&J has a strong cardiology franchise growing double digits. In the surgery business, J&J plans to be a player in robotic surgery and filed for FDA approval of its soft tissue robot called OTTAVA. In the vision business, J&J is a leader in contact lenses, which is a steady growth business with demographic tailwinds. J&J is one of only two companies in the U.S. with a AAA credit rating (the other being Microsoft). In addition, J&J generates over $20 billion of free cash flow per year which allows the company to reinvest in the business and return value to shareholders. Although valuation has expanded in recent months due to strong execution, we believe the company’s accelerating growth outlook justifies a higher multiple for the business.”
Johnson & Johnson (NYSE:JNJ) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 104 hedge fund portfolios held Johnson & Johnson (NYSE:JNJ) at the end of the fourth quarter, up from 103 in the previous quarter. While we acknowledge the risk and potential of Johnson & Johnson (NYSE:JNJ) 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 Johnson & Johnson (NYSE:JNJ) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Johnson & Johnson (NYSE:JNJ) and shared the list of stocks Jim Cramer discussed. 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.
