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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 stocks like Planet Fitness, Inc. (NYSE:PLNT). Planet Fitness, Inc. (NYSE:PLNT) is a leading US-based franchise that operates fitness centers under the Planet Fitness brand. On May 4, 2026, Planet Fitness, Inc. (NYSE:PLNT) closed at $63.29 per share. One-month return of Planet Fitness, Inc. (NYSE:PLNT) was -13.82%, and its shares lost 35.94% over the past 52 weeks. Planet Fitness, Inc. (NYSE:PLNT) has a market capitalization of $5.06 billion.
Baron Small Cap Fund stated the following regarding Planet Fitness, Inc. (NYSE:PLNT) in its Q1 2026 investor letter:
"Planet Fitness, Inc. (NYSE:PLNT), a leading franchiser and operator of low-cost fitness centers, detracted from performance after the company issued disappointing 2026 guidance that came in below investor expectations, especially relative to more aggressive three-year financial targets provided months earlier. During the quarter, the company’s internal improvements under new leadership led to same-store sales growth of 5.7%, EBITDA increasing 12%, earnings per share rising 18.6%, and gym openings exceeding expectations. Longer term, we believe Planet Fitness will benefit from ongoing initiatives to improve member experience and franchisee returns, remaining well positioned as the category leader in the secularly attractive fitness industry. We believe the new management team is very strong and believe in their vision of enhancing the brand, evolving the offering, and revitalizing growth. The stock traded down to a very cheap multiple for this leading franchise business over this guidance faux pas, which will cure itself over time."
Planet Fitness, Inc. (NYSE:PLNT) 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 Planet Fitness, Inc. (NYSE:PLNT) at the end of the fourth quarter, up from 35 in the previous quarter. While we acknowledge the potential of Planet Fitness, Inc. (NYSE:PLNT) 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 Planet Fitness, Inc. (NYSE:PLNT) and shared the list of most oversold stocks to buy. 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.