Gator Capital Management’s Investment Thesis for WEX (WEX)

Gator Capital Management, an investment management company, released its second-quarter 2025 investor letter. A copy of the same can be downloaded here. The fund had a strong performance in the quarter, with a 14.49% return, outperforming both the broader market and the Financials sector benchmarks. 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, Gator Capital Management highlighted stocks such as WEX Inc. (NYSE:WEX). WEX Inc. (NYSE:WEX) is a commerce platform operator that offers payment processing and information management solutions. The one-month return of WEX Inc. (NYSE:WEX) was 13.10%, and its shares lost 3.49% of their value over the last 52 weeks. On August 15, 2025, WEX Inc. (NYSE:WEX) stock closed at $174.38 per share, with a market capitalization of $5.975 billion.

Gator Capital Management stated the following regarding WEX Inc. (NYSE:WEX) in its second quarter 2025 investor letter:

“WEX Inc. (NYSE:WEX) offers a compelling investment from current levels. WEX is a payments company with three segments: fleet fuel cards, health savings accounts, and corporate payments. WEX’s business model is attractive because it is capital-light. Almost all net income generated by the company is available as free cash flow to pay down debt, make acquisitions, or return to shareholders. Although growth has slowed in recent years, the valuation doesn’t reflect the high-quality nature of the business.

Our investment thesis is below:

High-Quality Business – WEX Inc. operates a high-quality business model that has low capital intensity and strong customer retention. Payment processing requires limited physical infrastructure. Also, WEX has low customer turnover due to the embedded nature of its services in clients’ daily operations, such as fleet fuel management and employee benefits administration. These offerings often involve customized integrations and data reporting tools that create high switching costs and lead to long-term client relationships. This enables WEX to generate robust free cash flow and high returns on invested capital…” (Click here to read the full text)

An executive standing in front of a large monitor that shows payment processing information.

WEX Inc. (NYSE:WEX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 44 hedge fund portfolios held WEX Inc. (NYSE:WEX) at the end of the first quarter, which was 36 in the previous quarter. WEX Inc. (NYSE:WEX) reported revenue of 659.6 million in the second quarter of 2025, representing a decrease of 2.1% year-over-year. While we acknowledge the risk and potential of WEX Inc. (NYSE:WEX) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WEX Inc. (NYSE:WEX) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered WEX Inc. (NYSE:WEX) and shared Renaissance Large Cap Growth Strategy’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.