Baron Capital's Q2 2025 Healthcare Stock Picks and Exits

Baron Capital's Baron Health Care Fund added seven new positions and exited seven in Q2 2025. The fund's top health care stock picks include companies in the pharmaceutical and biotechnology sectors. The article does not provide specific names or details on the companies, but mentions that the fund's performance was driven by strong returns from these stocks.

In Q2 2025, Baron Capital's Baron Health Care Fund made significant changes to its portfolio, adding seven new positions and exiting seven. The fund's top health care stock picks, primarily in the pharmaceutical and biotechnology sectors, drove strong returns for the quarter. The fund's performance was notable for its strategic additions and exits, indicating a focus on high-growth opportunities and risk management.

The fund added to its position in Masimo Corporation, a medical device company that manufactures non-invasive patient monitoring technologies. The company's divestiture of its consumer audio business allowed it to focus on its core health care business. The fund is optimistic about the company's growth prospects, expecting high single-digit top-line growth and significant earnings per share (EPS) improvement over the next five years. The trade war and tariff uncertainty have been an overhang, but the fund is confident in the company's ability to navigate these challenges [1].

Another addition was Exact Sciences Corporation, a molecular diagnostics company focused on early detection of colorectal cancer. The company's non-invasive colorectal cancer stool test, Cologuard, has seen growing adoption and is now used by around 13% of patients. The fund believes that Cologuard's advantages over colonoscopies will continue to drive growth, despite recent underperformance due to competition and regulatory uncertainties [1].

Eli Lilly and Company, a global pharmaceutical company, was also added to the portfolio. The fund is bullish on the company's GLP-1 medications for diabetes and obesity, expecting these drugs to become the standard of care and generate a $150 billion market. Lilly's pipeline of innovative drugs, including orforglipron and retatrutide, positions the company as a leader in this growing market [1].

Penumbra, Inc., a medical device company that manufactures mechanical thrombectomy devices, was another addition. The fund is optimistic about the company's computer-assisted vacuum thrombectomy (CAVT) technology, which maximizes clot removal while minimizing blood loss. The fund expects strong momentum in the stroke and venous settings, with the potential for significant market growth [1].

Edwards Lifesciences Corporation, a leading manufacturer of heart valve replacement and repair products, was reacquired. The fund believes that the company's leading position in the transcatheter aortic valve replacement (TAVR) market, along with its promising tricuspid valve replacement product, Evoque, will drive significant revenue growth [1].

The fund exited UnitedHealth Group Incorporated due to lowered and suspended earnings guidance, citing issues with new member health status, cost trends in Medicare Advantage, and a broadening of higher trends to Medicaid and commercial business. The fund plans to revisit the investment thesis after new management conducts a comprehensive review and resets earnings guidance [1].

Boston Scientific Corporation, Intuitive Surgical, Inc., Thermo Fisher Scientific Inc., and Arcellx, Inc. were also reduced to manage risk. The fund maintains a positive view about the long-term outlook for these companies but believes that portfolio risk management is essential [1].

The Baron Health Care Fund's strategic additions and exits in Q2 2025 demonstrate a focus on high-growth opportunities and risk management. The fund's performance was driven by strong returns from these stocks, indicating a successful quarter for the portfolio.

References:

[1] https://seekingalpha.com/article/4810752-baron-capitals-top-health-care-stock-picks-and-misses-from-q2-2025