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Baron Discovery Fund posts 19.1% Q2 gain, driven by CareDx surge
The fund lagged the Russell 2000 Growth Index in the quarter, gaining 19.1% versus 25.7%, citing an underweight in momentum and beta factors.
Baron Capital’s Baron Discovery Fund reported a 19.1% gain in Q2 2026 for institutional shares, but said results trailed the Russell 2000 Growth Index, which rose 25.7% over the same period. The firm attributed the lag to a momentum-driven “AI winners” trade that boosted the benchmark.
According to the fund’s Q2 investor letter, Baron Discovery Fund underperformed by 6.6% during the quarter, largely tied to being underweight in stocks linked to momentum and beta factors. The letter also emphasized a long-term approach focused on company fundamentals and valuation rather than chasing recent price action.
The investor letter highlighted CareDx, Inc. (NASDAQ: CDNA) as a contributor. Baron Capital described CareDx as a precision medicine company that provides diagnostic solutions for transplant patients, with its testing used to detect early rejection of heart, kidney, and lung transplants.
CareDx’s stock closed on August 11, 2026 at $47.23 per share, with a market capitalization of $2.4 billion and a year-to-date gain of 150.7%, the fund noted. The letter also pointed to a sharp reversal after earlier declines, including a third-quarter 2025 slide tied to a draft Centers for Medicare and Medicaid Services MolDX Program local coverage decision that, if finalized, could have reduced reimbursement for CareDx tests.
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