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Baron Capital, an investment management company, released its Q2 2026 letter for the "Baron Real Estate Income Fund." The Fund gained 12.18% (Institutional Shares) during the quarter, modestly outperforming the MSCI US REIT Index, which increased 11.84%. The letter can be downloaded here. Its long-term performance also remains strong, with Morningstar ranking it the #2 real estate fund since its December 2017 inception. The letter discusses management's current views, portfolio composition, key contributors and detractors, recent activity, and the outlook for real estate and the Fund. Management believes a multi-year recovery in real estate is beginning to emerge, despite elevated interest rates, housing affordability pressures, and AI-related disruption. Its constructive outlook is supported by attractive valuations, accelerating M&A, favorable supply-demand dynamics, healthy balance sheets, improving debt conditions, and increasing recognition of real estate as an AI beneficiary. The Fund remains positioned to benefit from improving growth, rising dividends, and potential valuation normalization. Please review the Fund's top five holdings to gain insights into their key selections for 2026.
In its second-quarter 2026 investor letter, Baron Real Estate Fund highlighted Pebblebrook Hotel Trust (NYSE:PEB). Pebblebrook Hotel Trust (NYSE:PEB) is a US-based publicly traded real estate investment trust and the largest owner of urban and resort lifestyle hotels. On September 17, 2026, Pebblebrook Hotel Trust (NYSE:PEB) closed at $17.99 per share. Over the past month, Pebblebrook Hotel Trust (NYSE:PEB) declined 2.65% while, its shares gained 50.42% over the past 52 weeks. Pebblebrook Hotel Trust (NYSE:PEB) has a market capitalization of $2.03 billion with a 52-week trading range between $9.99 to $19.93.
Baron Real Estate Fund stated the following regarding Pebblebrook Hotel Trust (NYSE:PEB) in its Q2 2026 investor letter:
"Shares of Pebblebrook Hotel Trust (NYSE:PEB) increased significantly during the quarter, driven by a standout earnings report that significantly exceeded expectations across all key metrics. Results reflected broad-based strength across both urban and resort markets, with particularly notable recovery in Los Angeles and San Francisco, driving meaningful margin expansion and bottom-line outperformance. Management also raised its full-year outlook, reinforcing confidence in the durability of the urban lodging recovery and potential for outperformance, while incoming monthly lodging data has been supportive of this outlook throughout the quarter."
Pebblebrook Hotel Trust (NYSE:PEB) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held Pebblebrook Hotel Trust (NYSE:PEB) at the end of the second quarter which was 23 in the previous quarter. While we acknowledge the potential of Pebblebrook Hotel Trust (NYSE:PEB) 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 covered Pebblebrook Hotel Trust (NYSE:PEB) and shared a bullish thesis on the company. 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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This article is originally published at Insider Monkey.
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