Transcat (TRNS): An Investment into Recurring Revenue Excellence

Diamond Hill Capital, an investment management company, released its “Small Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fourth quarter posted another period of favorable gains for equity markets, with the Russell 2000 Index returning 2.19%, roughly in line with the Russell 1000 Index’s 2.41% gain. Health care (+18.6%) emerged as the best-performing sector in the Russell 2000 Index. Heightened uncertainty and geopolitical risks contributed to a mixed market environment in 2025 and Q4, yet the Russell 2000 Index still posted a 12.81% gain for the year. Heading into 2026, the firm continues to focus on resilient businesses that can sustain earnings in a volatile landscape. The Strategy returned 4.88% (net of fees) in the quarter compared to the Russell 2000 Index’s 2.19% gain. Please review the Strategy’s top five holdings to gain insights into their key selections for 2025.

In its fourth-quarter 2025 investor letter, Diamond Hill Small Cap Strategy highlighted stocks like Transcat, Inc. (NASDAQ:TRNS). Transcat, Inc. (NASDAQ:TRNS) offers calibration and laboratory instrument services to highly regulated industries. The one-month return of Transcat, Inc. (NASDAQ:TRNS) was 11.70%, and its shares lost 9.21% of their value over the last 52 weeks. On February 4, 2026, Transcat, Inc. (NASDAQ:TRNS) stock closed at $70.64 per share, with a market capitalization of $659.226 million.

Diamond Hill Small Cap Strategy stated the following regarding Transcat, Inc. (NASDAQ:TRNS) in its fourth quarter 2025 investor letter:

“Transcat, Inc. (NASDAQ:TRNS) provides calibration, repair and inspection to highly regulated industries including life sciences, aerospace and defense. The company has strong recurring revenue streams driven by regulation and a track record of successful acquisitions while maintaining a strong balance sheet.”

Transcat, Inc. (NASDAQ:TRNS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held Transcat, Inc. (NASDAQ:TRNS) at the end of the third quarter, which was 12 in the previous quarter. In the fiscal second quarter of fiscal 2026, Transcat, Inc.’s (NASDAQ:TRNS) consolidated revenue was up 21% to $83 million. While we acknowledge the risk and potential of Transcat, Inc. (NASDAQ:TRNS) 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 Transcat, Inc. (NASDAQ:TRNS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Transcat, Inc. (NASDAQ:TRNS) and shared Prosper Stars & Stripes’ views on the company last quarter. In addition, please check out our hedge fund investor letters Q4 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.