Baron Capital, an investment management company, released its Q2 2026 investor letter for the "Baron Focused Growth Fund". A copy of the letter can be downloaded here. In the second quarter, the Baron Focused Growth Fund achieved a 13.26% gain, still trailing the Russell 2500 Growth Index's 24.02% return. The underperformance was driven by ongoing concerns about AI's impact on portfolio businesses and underexposure to AI infrastructure. The IPO of ****** eX provided a boost, but overall, the Fund's companies are generating robust revenue growth and strengthening margins through enhanced client engagement and product offerings. Many stocks remain historically undervalued, and companies are beginning accelerated share repurchases, bolstering investor confidence. The Fund is perceived as compelling, benefiting from favorable market conditions and strong balance sheets, while inflation and interest rates are expected to remain stable. The Fund has outperformed its Benchmark over the past 3, 5, and 10 years, showing significant excess returns with lower market risk, attributed to a research-driven investment approach. The Fund maintains a commitment to long-term investing in growth-oriented businesses, utilizing a balanced portfolio to mitigate risk and potentially enhance returns. Please review the Fund's top five holdings to gain insights into their key selections for 2026.
In its Q2 2026 investor letter, Baron Focused Growth Fund highlighted Birkenstock Holding plc (NYSE:BIRK). Birkenstock Holding plc (NYSE:BIRK) engages in the manufacturing and distribution of footwear products, contributing 0.75% to the Fund's performance. On August 19, 2026, Birkenstock Holding plc (NYSE:BIRK) closed at $36.13 per share, reflecting a market capitalization of $5.97 billion. Birkenstock Holding plc (NYSE:BIRK) posted a one-month return of -11.03%, while its shares lost 28.65% over the past 52 weeks.
Baron Focused Growth Fund stated the following regarding Birkenstock Holding plc (NYSE:BIRK) in its Q2 2026 investor letter:
"Shares of global footwear retailer Birkenstock Holding plc (NYSE:BIRK) increased 19.6% in the second quarter and helped performance by 75 bps as sales continued to be quite strong and grew at a mid-teens rate despite concerns about the war in the Middle East, a depreciating dollar, and tariffs. Full-price sell-through remains above 90%, closed toe shoes continue to increase penetration rates and same store sales are growing at double-digit rates. Despite the worsening macro since the first quarter, management confirmed all fiscal year 2026 targets and continue to execute on its key growth objectives of expanding retail stores, growing in Asia Pacific and increasing closed-toe penetration. The stock continues to trade at a significant discount to peers with the stock trading at just 15 times next year's earnings per share despite growing earnings 30% next year and 20% after that. We continue to believe the market is being too harsh on the comp