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Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Small Cap Fund”. A copy of the letter can be downloaded here. Baron Small Cap Fund was down 7.90% (Institutional Shares) in Q1 2026, trailing the Russell 2000 Growth Index’s -2.81% return. The first quarter started with optimism driven by expectations for higher growth and interest rate cuts, while the market sentiment shifted at the end of the quarter. The release of new AI applications unsettled markets due to fears of disruption and long-term effects on software, causing stocks in these sectors to decline. In late February, the Iran war caused oil prices to spike, leading to rising interest rates and inflation. 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 Small Cap Fund highlighted RBC Bearings Incorporated (NYSE:RBC) as a notable contributor. RBC Bearings Incorporated (NYSE:RBC) is an industrial company that focuses on manufacturing and marketing engineered precision bearings, components, and systems for aerospace, defense, and industrial markets. On May 4, 2026, RBC Bearings Incorporated (NYSE:RBC) closed at $593.54 per share. One-month return of RBC Bearings Incorporated (NYSE:RBC) was 8.77%, and its shares gained 76.16% over the past 52 weeks. RBC Bearings Incorporated (NYSE:RBC) has a market capitalization of $19.03 billion.
Baron Small Cap Fund stated the following regarding RBC Bearings Incorporated (NYSE:RBC) in its Q1 2026 investor letter:
"RBC Bearings Incorporated (NYSE:RBC) is a proprietary aerospace and defense (A&D) and industrial solutions provider. Shares rose during the quarter as the company’s end markets are undergoing significant, sustained growth—from A&D, led by marine-related programs, to commercial original equipment manufacturers, driven by Boeing’s reaccelerated production ramp. As a top-tier supplier, RBC is well positioned to meet this elevated level of demand, which should persist for the foreseeable future."
RBC Bearings Incorporated (NYSE:RBC) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 38 hedge fund portfolios held RBC Bearings Incorporated (NYSE:RBC) at the end of the fourth quarter, up from 30 in the previous quarter. While we acknowledge the potential of RBC Bearings Incorporated (NYSE:RBC) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
In another article, we covered RBC Bearings Incorporated (NYSE:RBC) and shared Alger Small Cap Focus Fund's insights on the company. 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.