Here's What Drove Diamond Hill Small-Mid Cap Strategy to Initiate a Position in Generac Holdings (GNRC)

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 Generac Holdings Inc. (NYSE:GNRC). Generac Holdings Inc. (NYSE:GNRC) is a manufacturer and supplier of power generation equipment, energy storage systems, and other power products. The one-month return of Generac Holdings Inc. (NYSE:GNRC) was 33.86%, and its shares gained 36.61% of their value over the last 52 weeks. On August 11, 2025, Generac Holdings Inc. (NYSE:GNRC) stock closed at $196.52 per share, with a market capitalization of $11.531 billion.

Diamond Hill Small-Mid Cap Fund  stated the following regarding Generac Holdings Inc. (NYSE:GNRC) in its second quarter 2025 investor letter:

"Despite markets’ relatively sharp bounce following April’s downward volatility, we were able to initiate several new positions in the quarter at what we consider compelling valuations: Generac Holdings Inc. (NYSE:GNRC), Alaska Air Group, Knife River Corporation, Taseko Mines, Century Communities and FTI Consulting.

Generac Holdings is a leading energy technology solutions manufacturer with a dominant position in residential home standby power and a diverse offering of energy solutions. We anticipate the combination of increasing electricity usage and electrical grid instability will drive growing demand for Generac’s products. While the market seems to have focused on near-term consumer weakness and potential tariff-related headwinds, we believe the long-term outlook is constructive and capitalized on a discounted valuation relative to our estimate of intrinsic value to initiate a position."

Generac Holdings Inc. (NYSE:GNRC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 48 hedge fund portfolios held Generac Holdings Inc. (NYSE:GNRC) at the end of the first quarter, compared to 59 in the previous quarter. Generac Holdings Inc.’s (NYSE:GNRC) net sales increased 6% year-over-year to $1.06 billion in the second quarter of 2025. While we acknowledge the potential of Generac Holdings Inc. (NYSE:GNRC) 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 Generac Holdings Inc. (NYSE:GNRC) and shared Ariel Focus Fund's views on the company. 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.