Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Discovery Fund”. A copy of the letter can be downloaded here. It was a difficult quarter for Baron Discovery Fund, both on an absolute and relative basis. The Fund declined 10.65% (Institutional Shares) in the quarter, compared to the Russell 2000 Growth Index’s return of -2.81%. The underperformance of 7.88% was primarily attributed to sectors such as Information Technology, Consumer Discretionary, Health Care, and Industrials, along with a lack of exposure to Energy. The Fund sees the current SaaS-pocalypse as an opportunity to invest in compelling prospects among software companies that possess robust and sustainable competitive advantages. 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 Discovery Fund highlighted stocks like Heartflow, Inc. (NASDAQ:HTFL). Heartflow, Inc. (NASDAQ:HTFL) is a medical device company that focuses on AI-driven non-invasive solutions for diagnosing and managing coronary artery diseases. On May 7, 2026, Heartflow, Inc. (NASDAQ:HTFL) closed at $29.98 per share. One-month return of Heartflow, Inc. (NASDAQ:HTFL) was 11.24%, and its shares gained 2.85% over the past 52 weeks. Heartflow, Inc. (NASDAQ:HTFL) has a market capitalization of $2.59 billion.
Baron Discovery Fund stated the following regarding Heartflow, Inc. (NASDAQ:HTFL) in its Q1 2026 investor letter:
“We also added to Heartflow, Inc. (NASDAQ:HTFL), whose software analyzes CT scans of a patient’s coronary arteries done with contrast, and shows calcification, plaque buildup, and blood flow quality in a three-dimensional model. It is hard to understand how Heartflow would be easily disintermediated, given the customer trust it has built up, and its FDA approved software based on significant clinical trials and millions of real-world CT scan analyses.”
Heartflow, Inc. (NASDAQ:HTFL) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 16 hedge fund portfolios held Heartflow, Inc. (NASDAQ:HTFL) at the end of the fourth quarter, compared to 23 in the previous quarter. While we acknowledge the risk and potential of Heartflow, Inc. (NASDAQ:HTFL) 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 Heartflow, Inc. (NASDAQ:HTFL) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Heartflow, Inc. (NASDAQ:HTFL) and shared the list of stocks gaining momentum fast. 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.
