Baron Funds released its “Baron Durable Advantage Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund primarily focuses on investing in securities of large-sized companies. The fund increased 15.6% (Institutional Shares) in the second quarter compared to a 10.9% return for the S&P 500 Index (the Index). The Fund is up 7.5%, year to date, compared to the 6.2% gain for the Index. After two consecutive years of strong market recovery, there was a correction at the end of the first quarter and the early part of the second quarter. But later in the second quarter, the market rebounded meaningfully. For more information on the fund’s best picks in 2025, please check its top five holdings.
In its second-quarter 2025 investor letter, the Baron Durable Advantage Fund highlighted stocks such as Texas Roadhouse, Inc. (NASDAQ:TXRH). Texas Roadhouse, Inc. (NASDAQ:TXRH) is a casual dining restaurant that operates in Texas Roadhouse, Bubba’s 33, and Other segments. The one-month return of Texas Roadhouse, Inc. (NASDAQ:TXRH) was -5.57%, and its shares gained 3.33% of their value over the last 52 weeks. On August 21, 2025, Texas Roadhouse, Inc. (NASDAQ:TXRH) stock closed at $173.93 per share, with a market capitalization of $11.558 billion.
Baron Durable Advantage Fund stated the following regarding Texas Roadhouse, Inc. (NASDAQ:TXRH) in its second quarter 2025 investor letter:
“Our third largest addition in the quarter was to our newer position in Texas Roadhouse, Inc. (NASDAQ:TXRH) , the largest casual dining chain in the U.S., where we were also able to benefit from the increased market volatility to add to our position in the $150s and $160s. Its main brand, Texas Roadhouse, is known for “Legendary Food, Legendary Service” and the company continues to gain share due to its high quality, made from scratch meals served at affordable prices. The company’s most recent quarterly results have corroborated our view as the company saw increasing traffic at its restaurants, despite a volatile operating environment characterized by softening consumer spending and one-off factors such as poor weather, which negatively impacted demand for restaurants. The company continues to show strong value for guests, choosing not to raise prices as fast as inflation. While actions like these pressure short-term margins, over the long term this strategy has yielded strong results as shown by continued market share gains and growth in profit dollars. The company also continues to invest in restaurants with new kitchen displays and guest management systems. These systems should lead not only to better labor retention, but also to an improved guest experience. We continue to believe that Texas Roadhouse is a durable compounder. We expect units to grow at a mid-single-digit CAGR, positive same store sales, and profit growth in the high single-digit to low double digit range with shareholder returns bolstered by both their dividend and share repurchases.”
View of kitchen staff working together to deliver an extraordinary dining experience.
Texas Roadhouse, Inc. (NASDAQ:TXRH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held Texas Roadhouse, Inc. (NASDAQ:TXRH) at the end of the second quarter, which was 47 in the previous quarter. Texas Roadhouse, Inc.’s (NASDAQ:TXRH) second-quarter revenue rose to more than $1.5 billion for the first time due to strong traffic growth. While we acknowledge the risk and potential of Texas Roadhouse, Inc. (NASDAQ:TXRH) 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 Texas Roadhouse, Inc. (NASDAQ:TXRH) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Texas Roadhouse, Inc. (NASDAQ:TXRH) and shared the list of stocks Jim Cramer discussed. In addition, please check out our hedge fund investor letters Q2 2025 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.
