Consistent Results Restored Confidence in Forgent Power Solutions (FPS)

Consistent Results Restored Confidence in Forgent Power Solutions (FPS)

Tue, August 11, 2026 at 5:46 PM GMT+3 3 min read

• FPS +2.39%
• ^RUT +0.55%

Baron Capital, an investment management company, released its Q2 2026 investor letter for the "Baron Discovery Fund". A copy of the letter is available to download here. Baron Discovery Fund appreciated by 19.08% (Institutional Shares) in the quarter, underperforming the Russell 2000 Growth Index, which gained 25.71%. This lag was primarily due to a momentum-driven "AI winners" trade, with these stocks largely contributing to the Benchmark's performance. The Fund experienced a 6.63% underperformance, largely driven by an underweight in strong-performing Momentum and Beta factors. The Fund prioritizes a long-term balanced portfolio over chasing momentum. The letter discussed parallels between the current AI market and the late 1990s dot-com bubble. The firm remains focused on company fundamentals and long-term valuation. Please review the fund's top five holdings to gain insights into their key selections for 2026.

In its Q2 2026 investor letter, Baron Discovery Fund highlighted Forgent Power Solutions, Inc. (NYSE:FPS) as a leading contributor to performance. Forgent Power Solutions, Inc. (NYSE:FPS) is a leading industrial company that designs and manufactures electrical distribution equipment used in data centers, the power grid, and energy-intensive industrial facilities. On August 10, 2026, Forgent Power Solutions, Inc. (NYSE:FPS) closed at $37.60 per share, reflecting a market capitalization of $11.45 billion. Forgent Power Solutions, Inc. (NYSE:FPS) posted a one-month return of -6.12%.

Baron Discovery Fund stated the following regarding Forgent Power Solutions, Inc. (NYSE:FPS) in its Q2 2026 investor letter:

"Forgent Power Solutions, Inc. (NYSE:FPS) is a leading manufacturer of electrical distribution equipment used in data centers, the power grid, and industrial applications. Forgent is a low- and medium voltage equipment specialist focused on custom, "engineered-to order" products (over 90% of revenue) whereas larger competitors in the industry generally focus more on higher voltage and standard products. The stock rose during the quarter as Forgent continued to deliver very strong financial results reflecting improving demand for its products amidst the broader data points on AI infrastructure and grid buildout continuing to point to strong growth for the next several years. Forgent is gaining share with its ability to offer customized products at industry-leading lead times and is still just scratching the surface of its opportunity having sold very little directly to the biggest customers in the market. The company has invested heavily in capacity and people to support future growth, and we see many strong years of growth and margin expansion ahead as it grows from an approximate $1.2 billion revenue run rate currently into its $5 billion manufacturing footprint."

Forgent Power Solutions, Inc. (NYSE:FPS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 76 hedge fund portfolios held Forgent Power Solutions, Inc. (NYSE:FPS) at the end of the first quarter. While we acknowledge the potential of Forgent Power Solutions, Inc. (NYSE:FPS) 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 thebest short-term AI stock.

In another article, we covered Forgent Power Solutions, Inc. (NYSE:FPS) and shared Conestoga Capital Advisors' insight on the company. Baron Discovery Fund established a position in Forgent Power Solutions, Inc. (NYSE:FPS) in Q1 2026, highlighting its low- and medium-voltage equipment focus and strong backlog visibility. In addition, please check out our hedge fund investor letters Q2 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.