Baird Equity Asset Management recently released its "Small/Mid Cap Growth Strategy" second-quarter 2026 investor letter. A copy of the letter can be downloaded here . The fund benefited from a sharp rebound in the broader equity market during the second quarter of 2026, as improving corporate earnings, resilient economic growth, moderating inflation, and continued artificial intelligence investment supported strong gains across growth stocks. The strategy returned 17.7% net of fees in Q2, compared with a 24.0% gain for the Russell 2500 Growth Index, with the more than 600-basis-point relative shortfall primarily driven by factor exposures, as high-volatility, high-beta, and high-momentum stocks significantly outperformed; despite positive stock selection, the strategy could not keep pace with the AI-led rally. Technology gained 41%, and industrials rose 16% in absolute terms, but both remained relative detractors as semiconductor and AI-infrastructure-related stocks surged, while consumer discretionary and consumer staples were positive relative contributors, and healthcare underperformed. Looking ahead, Baird believes AI has the potential to create substantial long-term value across industries, although rapidly rising expectations and increasingly concentrated market leadership indicate that risks are building in certain areas. Moreover, management is encouraged by broader market participation beyond semiconductors and data-center infrastructure and continues to focus on high-quality businesses with durable competitive advantages, attractive long-term growth opportunities, and management teams capable of creating value through changing market environments. In addition, please check the Fund's top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Baird Small/Mid Cap Growth Strategy highlighted stocks like Alkermes plc (NASDAQ: ALKS ). Alkermes plc is a biopharmaceutical company that Baird highlighted for its lead product in the Orexin receptor category and its potential applications in wakefulness and other indications. The one-month return of Alkermes plc (NASDAQ:ALKS) was -9.44% while its shares traded between $27.00 and $55.67 over the last 52 weeks. On October 2, 2026, Alkermes plc (NASDAQ:ALKS) stock closed at approximately $41.75 per share, with a market capitalization of about $7.05 billion.
Baird Small/Mid Cap Growth Strategy stated the following regarding Alkermes plc (NASDAQ:ALKS) in its Q2 2026 investor letter:
"Finally, Alkermes plc (NASDAQ:ALKS)is one of a few companies with a lead product in the Orexin receptor category, which has promising growth potential in both wakefulness and potentially other indications ( Click Here To Read The Letter In Detail )."
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Alkermes plc (NASDAQ:ALKS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026 . As per our database, 55 hedge fund portfolios held Alkermes plc (NASDAQ:ALKS) at the end of the first quarter, which was 56 in the previous quarter. While we acknowledge the risk and potential of Alkermes plc (NASDAQ:ALKS) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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 Alkermes plc (NASDAQ:ALKS) and shared our views on the company's early ADHD drug results. 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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This article is originally published at Insider Monkey .
