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 Vertiv Holdings Co (NYSE:VRT) as a notable contributor. Vertiv Holdings Co (NYSE:VRT) is a critical infrastructure solutions provider for data centers, communication networks, and commercial and industrial environments. On May 4, 2026, Vertiv Holdings Co (NYSE:VRT) closed at $330.97 per share. One-month return of Vertiv Holdings Co (NYSE:VRT) was 26.18%, and its shares gained 254.05% over the past 52 weeks. Vertiv Holdings Co (NYSE:VRT) has a market capitalization of $127.13 billion.
Baron Small Cap Fund stated the following regarding Vertiv Holdings Co (NYSE:VRT) in its Q1 2026 investor letter:
“Vertiv Holdings Co (NYSE:VRT) is a leading global provider of critical digital infrastructure solutions for data centers, communication networks, and commercial and industrial environments, with one of the broadest offerings in electrical and thermal management equipment and services within the data center infrastructure industry. Shares increased after Vertiv reported blowout orders and backlog, well above expectations, and guided to meaningfully higher earnings. The company is benefiting from the industry’s shift toward integrated and modular solutions. Vertiv is a leading provider of these solutions, backed by industry-leading servicing capabilities, and is also well positioned to support key technology transitions, including liquid cooling and direct current architectures. We underwrite that Vertiv will grow its revenues by over 40% in 2026 and 30% in 2027, with increasing margins and free cash flow. Though the stock is up a ton, it trades at a reasonable multiple. We continue to see big upside and hold a large position.”
Vertiv Holdings Co (NYSE:VRT) ranks 38 on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 112 hedge fund portfolios held Vertiv Holdings Co (NYSE:VRT) at the end of the fourth quarter, up from 102 in the previous quarter. While we acknowledge the potential of Vertiv Holdings Co (NYSE:VRT) 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.
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