Diamond Hill Capital, an investment management company, released its "Small-Mid Cap Fund" second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q2, the market surged uniformly for the rest of the quarter following a sharp decline in April due to President Trump's "Liberation Day" tariffs announcement. The portfolio returned 5.60% (gross) and 5.37% (net) compared to an 8.59% return for the Russell 2500 Index. For more information on the fund's top picks in 2025, please check its top five holdings.
In its second-quarter 2025 investor letter, Diamond Hill Small-Mid Cap Fund highlighted stocks such as Gates Industrial Corporation plc (NYSE:GTES). Gates Industrial Corporation plc (NYSE:GTES) manufactures and distributes engineered power transmission and fluid power solutions. The one-month return of Gates Industrial Corporation plc (NYSE:GTES) was -3.07%, and its shares gained 43.25% of their value over the last 52 weeks. On August 11, 2025, Gates Industrial Corporation plc (NYSE:GTES) stock closed at $23.68 per share, with a market capitalization of $6.1 billion.
Diamond Hill Small-Mid Cap Fund stated the following regarding Gates Industrial Corporation plc (NYSE:GTES) in its second quarter 2025 investor letter:
"Other top contributors in Q2 included Regal Rexnord, Mr. Cooper Group and Gates Industrial Corporation plc (NYSE:GTES). Gates Industrial, an engineered power transmission and fluid power solutions provider, benefited as it produces in and for North America -- mitigating what otherwise could have been direct tariff impacts. As more production is expected to shift to the US and Mexico, Gates Industrial stands to benefit."
A factory worker in a safety vest tightening a V-belt on a power transmission assembly.
Gates Industrial Corporation plc (NYSE:GTES) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held Gates Industrial Corporation plc (NYSE:GTES) at the end of the first quarter, which was 39 in the previous quarter. In the second quarter, Gates Industrial Corporation plc (NYSE:GTES) reported $884 million in total sales, representing a 0.6% decline on core basis. While we acknowledge the potential of Gates Industrial Corporation plc (NYSE:GTES) 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.