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Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Discovery Fund”. A copy of the letter can be downloaded here. It was a difficult quarter for Baron Discovery Fund, both on an absolute and relative basis. The Fund declined 10.65% (Institutional Shares) in the quarter, compared to the Russell 2000 Growth Index’s return of -2.81%. The underperformance of 7.88% was primarily attributed to sectors such as Information Technology, Consumer Discretionary, Health Care, and Industrials, along with a lack of exposure to Energy. The Fund sees the current SaaS-pocalypse as an opportunity to invest in compelling prospects among software companies that possess robust and sustainable competitive advantages. 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 Discovery Fund highlighted Advanced Energy Industries, Inc. (NASDAQ:AEIS) as one of its leading contributors. Advanced Energy Industries, Inc. (NASDAQ:AEIS) is a leading precision power conversion, measurement, and control solutions provider for semiconductor equipment and data centers. On May 06, 2026, Advanced Energy Industries, Inc. (NASDAQ:AEIS) stock closed at $335.57 per share. One-month return of Advanced Energy Industries, Inc. (NASDAQ:AEIS) was -3.78%, and its shares gained 226.36% over the past 52 weeks. Advanced Energy Industries, Inc. (NASDAQ:AEIS) has a market capitalization of $13.72 billion.
Baron Discovery Fund stated the following regarding Advanced Energy Industries, Inc. (NASDAQ:AEIS) in its Q1 2026 investor letter:
"Advanced Energy Industries, Inc. (NASDAQ:AEIS) is a designer and manufacturer of products used to transform, refine, and modify electrical power for use in semiconductor, industrial, medical, data center, and telecommunications end markets. Advanced Energy’s stock rose during the quarter as earnings and guidance were better than expected and as the market began to appreciate the strength that the company would see in both its data center and semiconductor end markets. The company is enjoying the fruits of having repositioned its data center segment to focus on sole source, differentiated, higher margin business. AI’s increasing power requirements play to Advanced Energy’s strengths in power density and efficiency. The company also recently launched new products into the semiconductor market which are expected to drive strong growth through this year. Combined with the early stages of a recovery in its industrial and medical end markets, Advanced Energy is poised for several years of continued strong growth and margin expansion. The company also remains focused on acquisitions to bolster its product offerings, particularly in the large fragmented industrial and medical spaces."
Advanced Energy Industries, Inc. (NASDAQ:AEIS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 27 hedge fund portfolios held Advanced Energy Industries, Inc. (NASDAQ:AEIS) at the end of the fourth quarter, compared to 28 in the previous quarter. While we acknowledge the potential of Advanced Energy Industries, Inc. (NASDAQ:AEIS) 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 Advanced Energy Industries, Inc. (NASDAQ:AEIS) and shared the list of stocks Jim Cramer discussed. 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.