Here’s What Created a Wide Moat for Generac Holdings (GNRC)

Ariel Investments, an investment management company, released its “Ariel Focus Fund” second-quarter investor letter.  A copy of the letter can be downloaded here. The second quarter of 2025 saw a period of extremes. Despite an initial market sell-off caused by the “Liberation Day” tariff announcement, the stock market recovered, supported by renewed interest in AI-related stocks, strong economic data, and solid corporate earnings. In the environment, the fund returned +4.75%, outperforming the Russell 1000 Value Index’s +3.79% gain but lagging behind the S&P 500 Index’s +10.94% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, Ariel Focus 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 14.66%, and its shares lost 4.17% of their value over the last 52 weeks. On July 18, 2025, Generac Holdings Inc. (NYSE:GNRC) stock closed at $153.11 per share, with a market capitalization of $9.046 billion.

Ariel Focus Fund stated the following regarding Generac Holdings Inc. (NYSE:GNRC) in its second quarter 2025 investor letter:

“Finally, we bought shares of a company held in other Ariel portfolios during the quarter, Generac Holdings Inc. (NYSE:GNRC), a leading global manufacturer of power generation equipment. The company has an unmatched distribution network, product portfolio and enjoys strong brand advantages. We believe this creates a wide moat for this niche business which commands around 80% market share in the North American residential market. Historically, growth has been limited due to a lack of awareness of the benefits of a home standby generator, as well as its high price point. More recently, however, more frequent weather-related and aging infrastructure related power outages have tipped the scales of awareness in both the residential and commercial markets. This awareness should continue to drive growth, margin expansion and free cash flow generation. The stock came under pressure due to concerns that tariffs and a weakening consumer environment would be penalized near-term demand, giving us an opportunity to acquire shares in a unique, high quality business.”

Jim Cramer on Generac (GNRC): “It's Not a Great Stock”

A technician in protective gear repairing a huge generator at a power plant.

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 $942 million in the first quarter of 2025. While we acknowledge the risk and potential of Generac Holdings Inc. (NYSE:GNRC) 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 Generac Holdings Inc. (NYSE:GNRC) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Generac Holdings Inc. (NYSE:GNRC) and shared the list of stocks on Jim Cramer’s radar. 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.