Baron Capital, an investment management company, released its Q2 2026 investor letter for the “Baron Small Cap Fund.” Baron Small Cap Fund gained 12.57% (Institutional Shares) in the second quarter, trailing the Russell 2000 Growth Index’s 25.71% return. A copy of the letter can be downloaded here. U.S. equities rebounded sharply after March’s selloff related to the U.S.-Iran conflict, with AI infrastructure, semiconductors, and other technology stocks driving much of the market’s gains. Small caps also outperformed large caps, although performance remained concentrated in high-Beta and Momentum stocks, areas where the Fund has historically had less exposure. The Fund benefited from several AI-related and industrial holdings, but software and services stocks remained pressured by concerns that AI could disrupt their businesses. Looking ahead, management believes broader market participation, attractive small-cap valuations, improving industrial growth, and stronger earnings could support future returns despite continued uncertainty around oil prices, inflation, and interest rates. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Baron Small Cap Fund highlighted Vertiv Holdings Co (NYSE:VRT), which contributed 2.66% to performance during the period. Vertiv Holdings Co (NYSE:VRT) is a critical infrastructure solutions provider for data centers, communication networks, and commercial and industrial environments. On August 17, 2026, Vertiv Holdings Co (NYSE:VRT) closed at $292.43 per share. The one-month return of Vertiv Holdings Co (NYSE:VRT) was -8.92% and its shares gained 114.91% over the past 52 weeks. Vertiv Holdings Co (NYSE:VRT) has a market capitalization of $112.58 billion.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q2 2026 investor letter:
“Vertiv Holdings Co (NYSE:VRT) provides power and cooling systems for data centers. Shares increased during the quarter as Vertiv reported strong Q1 financial results (adjusted earnings per share increased 83% year-over-year) and increased fiscal year guidance fueled by organic sales growth of around 30%. Vertiv is benefiting from the industry’s shift toward integrated and modular solutions that help alleviate labor shortages and accelerate deployment timelines, supported by its market-leading product portfolio and service capabilities. The company is also well positioned to support key technology transitions, including liquid cooling and direct current power architectures. Management increased long-term financial projections to 20%-plus revenue CAGR and a 27%-plus EBIT margin out to 2030, with $24 billion of cash to deploy for M&A, offering a compelling investment from current levels. Though we have trimmed our position along the way, we maintain a large position believing strongly in the future success of the company.”
Vertiv Holdings Co (NYSE:VRT) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 96 hedge fund portfolios held Vertiv Holdings Co (NYSE:VRT) at the end of the first quarter which was 112 in the previous quarter. While we acknowledge the risk and potential of Vertiv Holdings Co (NYSE:VRT) 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 Vertiv Holdings Co (NYSE:VRT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Vertiv Holdings Co (NYSE:VRT) and shared Carillon Tower Advisers’ insight on the company. 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.
