Small caps have taken the lead this year, with the Russell 2000 up 13% since the start of 2026, compared with nearly 10% for the S&P 500. Cliff Greenberg, manager of Baron Capital’s small-cap fund, said nearly a decade of underperformance has left smaller companies relatively cheap and overlooked by investors. The Russell 2000 trades at 16 times trailing earnings, compared with about 25 times for the S&P 500, while easing inflation and falling oil prices could support smaller companies. Baron Capital is positioning for opportunities in Shake Shack, Waste Connections, Doncasters and Texas Roadhouse, which offer expansion prospects or attractive valuations.
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