Baron Funds, an investment management company, released its “Baron Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter of 2025, the fund was down 9.07% (Institutional Shares) compared to the Russell 2000 Growth Index’s (the Index) -11.12% return. Small-cap stocks continued to underperform larger market caps meaningfully, so the Fund lagged the Russell 3000 Index, which fell 4.72% in the quarter. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Baron Small Cap Fund highlighted stocks such as RadNet, Inc. (NASDAQ:RDNT). Headquartered in Los Angeles, California, RadNet, Inc. (NASDAQ:RDNT) provides outpatient diagnostic imaging services. The one-month return of RadNet, Inc. (NASDAQ:RDNT) was 12.63%, and its shares lost 3.30% of their value over the last 52 weeks. On May 23, 2025, RadNet, Inc. (NASDAQ:RDNT) stock closed at $56.61 per share with a market capitalization of $4.247 billion.

Baron Small Cap Fund stated the following regarding RadNet, Inc. (NASDAQ:RDNT) in its Q1 2025 investor letter:

“During the quarter, we bought shares of RadNet, Inc. (NASDAQ:RDNT), the largest owner and operator of fixed-site, freestanding diagnostic imaging centers in the U.S, with 399 locations. The company’s imaging centers offer multi-modality imaging services, including magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology (X-ray), and other related procedures. The company develops leading positions in regional markets to leverage operational efficiencies and contracting benefits with health plans. Currently, the company has a strong regional presence in California, Maryland, New York, and New Jersey.

A radiologist studying a monitor with a detailed image of a lung cancer tumor.

RadNet, Inc. (NASDAQ:RDNT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held RadNet, Inc. (NASDAQ:RDNT) at the end of the fourth quarter which was 29 in the previous quarter. RadNet, Inc. (NASDAQ:RDNT) reported revenue of $471.4 million, an increase of 9.2% year-over-year. While we acknowledge the potential of RadNet, Inc. (NASDAQ:RDNT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.