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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Baron Durable Advantage Fund gained 13.6% in Q2 2026 as markets recovered from Iran war volatility. AI infrastructure beneficiaries led performance with TSMC up 41.6% and Alphabet up 23.2% on accelerating cloud demand."
Baron Durable Advantage Fund gained 13.6% in Q2 2026, trailing the S&P 500's 15.2% return, but delivered 3.4% year-to-date versus the index's 10.2%. The quarter saw recovery from Q1's 9.0% decline caused by the Iran war and $140 oil, with markets rallying as worst outcomes were avoided. AI infrastructure beneficiaries drove performance, with TSMC up 41.6%, Alphabet up 23.2%, and strong contributions from Monolithic Power Systems, NVIDIA, and Broadcom. The manager views current valuations as irrationally low, with NVIDIA trading at 14.5x forward P/E despite 113% earnings growth, and similar compression across TSMC, Broadcom, Alphabet, and Amazon. AI demand is proven with Alphabet's cloud revenue accelerating to 82% growth and backlog surging to $514 billion. The portfolio's weighted average multiple is 5.4% below its 5-year average, with over 100% of year-to-date returns driven by fundamental growth rather than multiple expansion. The manager initiated Arxis in aerospace components and added to Amphenol and Lam Research, while exiting Intuit and Thermo Fisher. Since inception in December 2017, the fund has generated 15.8% annualized returns, 110bps ahead of the index.
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