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Does Gates Industrial Corp. PLC (GTES) Have an Opportunity to Re-rate?

Fiduciary Management Inc. (FMI), an independent money management firm, released its first quarter 2024 investor letter. A copy of the same can be downloaded here. The first quarter of this year saw the continuation of last year's stock market momentum, with growth stocks leading the way across market capitalization and geographical areas. The Small Cap Strategy rose 9.2% (gross) / 9.0% (net), in the quarter compared to 5.18% and 2.90% for the Russell 2000 Index and Russell 2000 Value Index. FMI Large Cap Strategy gained 8.7% (gross) / 8.6% (net) compared with 10.56% and 8.86% for the S&P 500 and iShares Russell 1000 Value ETF, respectively. The FMI All Cap Equity advanced 7.4% (gross) / 7.3% (net), compared with 9.89% for the iShares Russell 3000 ETF. Finally, the FMI International Strategies gained 5.8% (gross) / 5.7% (net) on a currency-hedged basis and 3.6% (gross) / 3.4% (net) on a currency-unhedged basis. In addition, please check the fund’s top five holdings to know its best picks in 2024.

Fiduciary Management featured stocks like Gates Industrial Corporation plc (NYSE:GTES) in the Q1 2024 investor letter. Headquartered in Denver, Colorado, Gates Industrial Corporation plc (NYSE:GTES) engages in the manufacturing and sale of engineered power transmission and fluid power solutions. On April 16, 2024, Gates Industrial Corporation plc (NYSE:GTES) stock closed at $17.34 per share. One-month return of Gates Industrial Corporation plc (NYSE:GTES) was -0.86%, and its shares gained 30.77% of their value over the last 52 weeks. Gates Industrial Corporation plc (NYSE:GTES) has a market capitalization of $4.51 billion.

Fiduciary Management stated the following regarding Gates Industrial Corporation plc (NYSE:GTES) in its first quarter 2024 investor letter:

"Gates Industrial Corporation plc (NYSE:GTES) manufactures highly engineered power transmission and fluid power solutions. The company is most well-known for its belts, which enable and control motion and are used in a broad range of applications. Blackstone took Gates public in early 2018 and remains the largest shareholder with a 27% ownership interest. Blackstone’s ownership stake is an overhang on the stock as they will inevitably sell their remaining stake. Destocking and a more challenging end market have also weighed on results. These transitory pressures have provided us with an opportunity to own a high-quality, well-run industrial company with solid through-cycle growth prospects and re-rating potential. The company is a leader in its large and fragmented markets with a well-recognized brand known for quality and technological innovation. These markets are largely replacement driven, which helps to reduce cyclicality, and management is targeting a handful of growth opportunities including chain-to-belt conversions, personal mobility, and automotive aftermarket, to name a few, that should drive revenue growth at 2 times underlying industrial production growth. There is also a margin opportunity as management executes on internal initiatives to reduce costs and improve productivity. Finally, with Gates stock trading at around 12 times 2024 P/E, we believe there is an opportunity for Gates to re-rate more in-line with other high-quality industrial peers given its attractive EPS growth outlook and strong return profile."

A factory worker in a safety vest tightening a V-belt on a power transmission assembly.

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Gates Industrial Corporation plc (NYSE:GTES) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Gates Industrial Corporation plc (NYSE:GTES) was held by 38 hedge fund portfolios, compared to 31 in the previous quarter, according to our database.

We previously discussed Gates Industrial Corporation plc (NYSE:GTES) in another article, where we shared the list of stocks billionaire Paul Tudor Jones and insiders love. In addition, please check out our hedge fund investor letters Q1 2024 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.