Gates Industrial Corporation Plc (GTES) Surged on a Demand Uptick in Automotive Replacement

The London Company, an investment management company, released “The London Company Small Cap Strategy” second quarter 2025 investor letter. A copy of the letter can be downloaded here. Following a significant downturn in the first quarter, U.S. equities saw a double-digit rise in the second quarter. The small-cap portfolio appreciated 2.7% (2.4% net) in the second quarter, lagging behind the Russell 2000 Index’s 8.5% gain. Sector allocation contributed to the relative performance, while stock selection was a headwind. Please review the fund's top 5 holdings to gain insight into their key selections for 2025.

In its second quarter 2025 investor letter, The London Company Small Cap Strategy 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 8.04%, and its shares gained 42.47% of their value over the last 52 weeks. On July 28, 2025, Gates Industrial Corporation plc (NYSE:GTES) stock closed at $25.26 per share with a market capitalization of $6.511 billion.

The London Company Small Cap Strategy stated the following regarding Gates Industrial Corporation plc (NYSE:GTES) in its second quarter 2025 investor letter:

"Gates Industrial Corporation plc (NYSE:GTES) – GTES was a top performer after delivering a strong quarter, driven by robust automotive replacement demand despite tariff challenges. Management reaffirmed guidance, leveraging pricing power and operational efficiencies to offset tariff costs. The stable replacement channel and margin gains from cost reductions and footprint optimization enhanced performance. We remain attracted to its strong margin profile, and low capital needs continue to drive robust free cash flow. Management’s disciplined capital allocation, balancing buybacks and deleveraging, enhances long-term shareholder value."

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 first quarter, Gates Industrial Corporation plc (NYSE:GTES) reported 848 million in total sales, representing a core growth of 1.4%. 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.

In another article, we covered Gates Industrial Corporation plc (NYSE:GTES) and shared Heartland Value Plus Fund's views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.