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Baron Capital, an investment management company, released its second-quarter 2026 investor letter for its "Baron Financials ETF". A letter can be downloaded here. In the quarter ended June 30, 2026, Baron Financials ETF (the Fund) increased by 1.82%, underperforming both the MSCI USA Financials Index (up 8.93%) and the FactSet Global FinTech Index (up 6.14%). U.S. equities soared, largely driven by AI infrastructure investments, despite challenges from the U.S.-Iran war, changing Federal Reserve rates, and consumer sentiment hampered by high living costs and inflation. Most gains were concentrated in Information Technology (IT) and Industrials, with IT outperforming the broader market at 31.8%, contributing significantly to the S&P 500's growth. Although growth outperformed value in the quarter, value remains ahead year to date. Small caps notably surpassed large caps. The Fund's underperformance relative to the Financials Index stemmed from lower bank exposure and a higher allocation to software and data firms affected by AI disruption fears. The Fund believes its holdings are undervalued and have a positive outlook, as economic conditions remain strong with healthy consumer and business spending. Also, check the fund's top five holdings to see its best picks in 2026.

In its second-quarter 2026 investor letter, Baron Financials ETF highlighted AerCap Holdings N.V. (NYSE:AER) as a new portfolio holding. AerCap Holdings N.V. (NYSE:AER) is a leading aviation leasing company headquartered in Dublin, Ireland. On August 27, 2026, AerCap Holdings N.V. (NYSE:AER) closed at $147.97 per share. Over the past month, AerCap Holdings N.V. (NYSE:AER) returned -1.94%, while its shares have gained 19.81% in the last 52 weeks. AerCap Holdings N.V. (NYSE:AER) has a market capitalization of $22.85 billion, and its stock has traded within a 52-week range of $118.93 to $158.81.

Baron Financials ETF stated the following regarding AerCap Holdings N.V. (NYSE:AER) in its Q2 2026 investor letter:

"We initiated a position in AerCap Holdings N.V. (NYSE:AER), the largest aircraft leasing company in the world. The company owns and manages over 3,100 aircraft, jet engines, and helicopters, which it leases to 300 customers worldwide. The lessor model enables airlines to avoid heavy upfront capital investment while providing the lessor predictable cash flows through long-term leases. We believe AerCap is an AI-proof business with steady growth, a skilled management team, and a cheap valuation.

AerCap benefits from the secular growth of global air travel. Passenger traffic has grown 5% annually since 1990 and is expected to grow 4% annually over the next 20 years, according to Boeing. Aircraft pricing is supported by favorable supply-demand dynamics: original equipment manufacturer (OEM) production constraints and global engine shortages have tightened supply, driving strong demand for leased aircraft and spare engines. Utilization rates exceed 99% and lease extension rates are 87%. Given decade-long backlogs at Boeing and Airbus, aircraft shortages should persist into the 2030s..." (Click here to read the full text)

AerCap Holdings N.V. (NYSE:AER) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 61 hedge fund portfolios held AerCap Holdings N.V. (NYSE:AER) at the end of the second quarter, which was 56 in the previous quarter. While we acknowledge the potential of AerCap Holdings N.V. (NYSE:AER) 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 discussed AerCap Holdings N.V. (NYSE:AER) and highlighted a list of stocks that crushed Q2 EPS projections. 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.