Here's What Boosted Talen Energy Corporation (TLN) in Q2

Alluvial Capital Management, an investment advisory firm, released its second-quarter 2025 investor letter. A copy of the same can be downloaded here. The fund rose 8.5% in the quarter, bringing the year-to-date returns to 15.6%. As of June 30, the comparable US benchmarks continued to be in negative territory for the year. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its second-quarter 2025 investor letter, Alluvial Capital Management highlighted stocks such as Talen Energy Corporation (NASDAQ:TLN). Talen Energy Corporation (NASDAQ:TLN) is an independent power producer and infrastructure company. The one-month return of Talen Energy Corporation (NASDAQ:TLN) was 43.75%, and its shares gained 193.21% of their value over the last 52 weeks. On August 12, 2025, Talen Energy Corporation (NASDAQ:TLN) stock closed at $380.61 per share, with a market capitalization of $17.388 billion.

Alluvial Capital Management stated the following regarding Talen Energy Corporation (NASDAQ:TLN) in its second quarter 2025 investor letter:

"Talen Energy Corporation (NASDAQ:TLN) was the biggest contributor to this quarter’s returns. In June, the company announced an agreement with Amazon to provide 1,920 megawatts of nuclear power to Amazon datacenters through 2042. The agreement provides a highly valuable long-term earnings stream for Talen. When power delivery reaches scale in 2032, Talen expects the agreement to provide incremental annual free cash flow per share of at least $7. I think this guidance will prove far too conservative based on continued share repurchases. Talen continues to shift its activities away from merchant power production and toward providing clean energy to datacenters on long-term, highly predictable contracts. As a result, investors are starting to value Talen shares less like those of an electricity wildcatter and more like a quasi-regulated utility with a blue-chip end customer. Every business would love to find a way to make more money and take less risk doing it, and that’s exactly what Talen is achieving.

A portion of Talen’s rise is due to the market’s exuberance over anything relating to AI and data centers. But unlike the AI darlings trading at 50 or 100 times their 2030 wildest fantasy earnings, Talen’s valuation remains grounded in reality at just a mid-teens multiple of 2026 free cash flow.

Just hours after I finished the first draft of this missive, Talen announced an agreement to purchase two modern high-efficiency combined-cycle gas generation facilities in Pennsylvania and Ohio. These plants will help Talen satisfy the burgeoning demand for power from the data center industry. The purchase is hugely beneficial to Talen’s free cash flow. Shares reacted well to the news, but we don’t think the market fully appreciates the impact the purchase will have on Talen’s long-term results. We gladly purchased additional Talen shares when the news broke."

Talen Energy Corporation (NASDAQ:TLN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 80 hedge fund portfolios held Talen Energy Corporation (NASDAQ:TLN) at the end of the first quarter, compared to 77 in the previous quarter. While we acknowledge the potential of Talen Energy Corporation (NASDAQ:TLN) 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 Talen Energy Corporation (NASDAQ:TLN) and shared the list of best multibagger stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

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