Baron Capital, an investment management company, has released an investor letter for the first quarter of 2026 for its “Baron SMID Cap EFT”. This is the first full quarter of results for the Baron SMID Cap ETF (BCSM). A copy of the book can be downloaded here. The Baron SMID Cap ETF focuses on investing in small, fast-growing businesses that demonstrate significant long-term growth potential, have long-lasting competitive advantages, have exceptional management teams, and offer compelling valuations. The fund fell 10.56% (NAV) in the first quarter, underperforming its benchmark, the Russell 2500 Growth Index, which fell 3.52%. During this quarter, investors moved into a select few companies benefiting from the use of artificial intelligence (AI), referred to as “AI winners,” while selling those considered “losers.” This creates a challenging situation for grassroots investors, as market prices are separated from fundamental prices. These terminations, combined with the onset of conflict in Iran, impacted portfolio performance during the quarter. In addition, please check the top five funds of the Fund to know their best choices in 2026.
In its investor letter for the first quarter of 2026, Baron SMID Cap EFT highlighted Dynatrace, Inc. (NYSE:DT). Dynatrace, Inc. (NYSE:DT) is a leading software company providing AI-powered visualization platforms. On June 3, 2026, Dynatrace, Inc. (NYSE:DT) closed at $43.44 per share. One month return of Dynatrace, Inc. (NYSE:DT) was 8.76%, and its shares lost 20.09% in the last 52 weeks. Dynatrace, Inc. (NYSE:DT) has a market capitalization of $12.66 billion.
Baron SMID Cap EFT says the following about Dynatrace, Inc. (NYSE:DT) in its Q1 2026 investor letter:
“We have raised our position Company Dynatrace, Inc. (NYSE:DT), a provider of “visibility” software that uses its proprietary AI model to predict network and operational issues so they can be addressed before they become major problems. Dynatrace is used by many of the world’s largest businesses, including airlines, banks and defense companies. We believe that the company is a large data-driven company, which means that it uses data that is generated, and not available from standard LLM providers. Dynatrace benefits from major competitive advantages as it is complex to use and therefore very “sticky” and difficult to replace with other solutions. Customers have also proven that they generate very high ROIs for Dynatrace. However, given the broad selloff of software stocks, this giant is trading at a very low valuation (13 times free cash flow, with free cash flow expected to grow in the mid-teens over the next few years).
