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 Red Rock Resorts, Inc. (NASDAQ:RRR). Based in Las Vegas, Nevada, Red Rock Resorts, Inc. (NASDAQ:RRR) develops and operates casino and entertainment properties, contributing 0.67% to the Fund's performance. On August 19, 2026, Red Rock Resorts, Inc. (NASDAQ:RRR) closed at $61.25 per share, reflecting a market capitalization of $6.24 billion. Red Rock Resorts, Inc. (NASDAQ:RRR) posted a one‑month return of -2.44%, while its shares gained 2.42% over the past 52 weeks.
Baron Focused Growth Fund stated the following regarding Red Rock Resorts, Inc. (NASDAQ:RRR) in its Q2 2026 investor letter:
"Shares of Las Vegas Locals casino operator Red Rock Resorts, Inc. (NASDAQ:RRR) increased 22.4% in the second quarter and helped performance by 67 bps as construction disruption dissipated and investors looked ahead to the benefits of the company's recent investments in its resorts. This should result in increased earnings and cash flow and allow the company to continue to invest in its properties while returning capital to shareholders. The company's balance sheet remains strong with increased liquidity for further capital investment and shareholder returns. We believe the stock remains attractive compared to what we believe the business can become in time."

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