Ducommun (DCO) is Benefitting From Strong Demand

Diamond Hill Capital, an investment management company, released its “Small Cap Strategy” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Markets continued their rally in the third quarter, with small-cap stocks gaining over 12% as measured by the Russell 2000 Index. However, the portfolio trailed the Russell 2000 Index in the quarter, returning 7.93% (net of fees). The relative underperformance was mainly due to the rally being driven by sectors that the portfolio typically does not own. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its third-quarter 2025 investor letter, Diamond Hill Capital Small Cap Strategy highlighted stocks such as Ducommun Incorporated (NYSE:DCO). Headquartered in Costa Mesa, California, Ducommun Incorporated (NYSE:DCO) provides engineering and manufacturing services to the aerospace, defense, industrial, and medical industries. The one-month return of Ducommun Incorporated (NYSE:DCO) was -6.24%, and its shares gained 31.04% of their value over the last 52 weeks. On November 24, 2025, Ducommun Incorporated (NYSE:DCO) stock closed at $87.27 per share, with a market capitalization of $1.304 billion.

Diamond Hill Capital Small Cap Strategy stated the following regarding Ducommun Incorporated (NYSE:DCO) in its third quarter 2025 investor letter:

"Other top contributors in Q3 included Red Rock Resorts, US Lime & Minerals and Ducommun Incorporated (NYSE:DCO). Ducommun is a critical Tier 1 and Tier 2 supplier of advanced material aerostructures and electrical components to the defense and commercial markets. Boeing is consistently producing its 737 Max airplane at a rate of 38 per month, which could increase to 42 per month by the end of 2025 — and Ducommun expects it will be able to supply Boeing at a rate roughly equal to its production rate by the middle of 2026. Ducommun is also benefiting from strong demand in its missile programs amid heightened geopolitical tensions globally."

Ducommun Incorporated (NYSE:DCO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 20 hedge fund portfolios held Ducommun Incorporated (NYSE:DCO) at the end of the second quarter, up from 15 in the previous quarter.  In the third quarter, Ducommun Incorporated (NYSE:DCO) reported record quarterly revenue of $212.6 million, marking an increase of 6% over last year. While we acknowledge the potential of Ducommun Incorporated (NYSE:DCO) 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 Ducommun Incorporated (NYSE:DCO) and shared the list of best small-cap defense stocks to buy. In addition, please check out our hedge fund investor letters Q3 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.