Baron Capital, an investment management company, released its Q2 2026 investor letter for the “Baron Discovery Fund”. A copy of the letter is available to download here. Baron Discovery Fund appreciated by 19.08% (Institutional Shares) in the quarter, underperforming the Russell 2000 Growth Index, which gained 25.71%. This lag was primarily due to a momentum-driven “AI winners” trade, with these stocks largely contributing to the Benchmark’s performance. The Fund experienced a 6.63% underperformance, largely driven by an underweight in strong-performing Momentum and Beta factors. The Fund prioritizes a long-term balanced portfolio over chasing momentum. The letter discussed parallels between the current AI market and the late 1990s dot-com bubble. The firm remains focused on company fundamentals and long-term valuation. Please review the fund’s top five holdings to gain insights into their key selections for 2026.
In its Q2 2026 investor letter, Baron Discovery Fund highlighted Rubrik, Inc. (NYSE:RBRK) as a newly added position. Rubrik, Inc. (NYSE:RBRK) is a leading data security solutions provider serving businesses worldwide. On August 11, 2026, Rubrik, Inc. (NYSE:RBRK) closed at $96.93 per share, reflecting a market capitalization of $19.95 billion and a year‑to‑date gain of 26.74%. Rubrik, Inc. (NYSE:RBRK) posted a one‑month return of 20.59%, while its shares gained 10.05% over the past 52 weeks.
Baron Discovery Fund stated the following regarding Rubrik, Inc. (NYSE:RBRK) in its Q2 2026 investor letter:
“We initiated a position in Rubrik, Inc. (NYSE:RBRK), a subscription software company focused on automating backup, storage, and recovery of corporate data, as well as creating resilience to cyberattacks on that data. It serves many Fortune 500 and Global 2000 companies including leading technology and defense firms. We purchased our investment in the mid-$50s per share during the “SaaS-pocalypse” when the market believed that every software company would be disintermediated by AI. Investors were also concerned that the increased cost of memory chips (due to an AI-data-center-induced shortage), would hamstring growth and margins of Rubrik as it and its customers use backup hardware. This has not materialized, and Rubrik does not believe memory costs are a material issue. At the time we invested, shares traded at about 21 times enterprise value to free cash flow (on 2027 numbers), with free cash flow growing over 40%. If the company has a clear competitive advantage (which we obviously believe based on our diligence), it was a steal at that price (it closed the quarter at over $80 per share).”
Rubrik, Inc. (NYSE:RBRK) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 46 hedge fund portfolios held Rubrik, Inc. (NYSE:RBRK) at the end of the first quarter, compared to 56 in the previous quarter. While we acknowledge the risk and potential of Rubrik, Inc. (NYSE:RBRK) 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 Rubrik, Inc. (NYSE:RBRK) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Rubrik, Inc. (NYSE:RBRK) and shared a list of best up and coming stocks to invest in. Baron Opportunity Fund initiated a position in Rubrik, Inc. (NYSE:RBRK) in Q1 2026, considering its accelerating share gains, product momentum, and profitability as drivers of long‑term growth. In addition, please check out our hedge fund investor letters Q2 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.
