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Baron Capital, an investment management company, released its Q1 2026 investor letter for the “Baron Health Care Fund”. A copy of the letter is available to download here. Baron Health Care Fund (the Fund) declined 6.97% (Institutional Shares) in the quarter, compared to the 4.88% decline for the Russell 3000 Health Care Index (the Benchmark) and the 3.96% decline for the Russell 3000 Index (the Index). The Fund appreciated 9.39% on an annualized basis since its inception, compared to the 8.97% gain for the Benchmark and the 13.26% gain for the Index. The disappointing stock selection drove the Fund’s underperformance in the quarter. Despite recent challenges, the Fund believes the long-term outlook for health care remains positive due to factors including an aging population, rising chronic disease rates, advances in biotechnology, and increased health care spending. 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 Health Care Fund highlighted BillionToOne, Inc. (NASDAQ:BLLN). BillionToOne, Inc. (NASDAQ:BLLN) is a precision diagnostics company specializing in molecular diagnostics. On May 1, 2026, BillionToOne, Inc. (NASDAQ:BLLN) closed at $77.49 per share. One-month return of BillionToOne, Inc. (NASDAQ:BLLN) was -9.37%, and YTD its shares lost 5.32%. BillionToOne, Inc. (NASDAQ:BLLN) has a market capitalization of $3.56 billion.
Baron Health Care Fund stated the following regarding BillionToOne, Inc. (NASDAQ:BLLN) in its Q1 2026 investor letter:
"We added to the Fund’s investment in BillionToOne, Inc. (NASDAQ:BLLN), a diagnostics company that is disrupting the market with more accurate prenatal and oncology genetic tests. At the core is the company's innovative quantitative counting template (QCT) technology, which allows BillionToOne to accurately count the number of mutation copies at a single-gene level. BillionToOne generates the vast majority of its revenue today from UNITY, which is a differentiated prenatal genetic test. Traditional prenatal tests can check for chromosomal abnormalities like Down syndrome but require more invasive testing to test for single gene inherited disorders. UNITY is a single blood draw from the mom that can screen for chromosomal problems and provide an accurate risk assessment for recessive single-gene disorders. BillionToOne has already captured 15% of the $2 billion-plus U.S. prenatal screening market (according to our estimates) in a short period of time, and we expect them to continue to gain share. BillionToOne is also making early headways in oncology, which represents a $50 billion-plus total addressable market, according to our estimates. The same QCT technology powers BillionToOne's NORTHSTAR SELECT therapy selection test, which can find 51% to 109% more actionable mutations than competitor tests. The test has a much lower lower-limit-of-detection compared to competitors and can detect driver mutations even when the allele copy number is low. BillionToOne also offers NORTHSTAR RESPONSE, which is a new type of test that can detect subtle change in a cancer patient's tumor burden and can track whether the patient is responding to therapy. We are optimistic that more data about RESPONSE this year will enable broad Medicare reimbursement for the test. BillionToOne's launch in oncology is still nascent, but we think this product differentiation will help BillionToOne capture share in this large and growing market. Impressively, BillionToOne has accomplished all of this while maintaining financial discipline. The company has 70% gross margins and has already achieved GAAP profitability and positive free cash flow."
BillionToOne, Inc. (NASDAQ:BLLN) is not on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 23 hedge fund portfolios held BillionToOne, Inc. (NASDAQ:BLLN) at the end of the fourth quarter, compared to 0 in the previous quarter. While we acknowledge the potential of BillionToOne, Inc. (NASDAQ:BLLN) 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 BillionToOne, Inc. (NASDAQ:BLLN) and shared the list of stocks discussed by Jim Cramer. 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.