Aristotle Capital Management, LLC, an investment management company, released its “Core Equity Fund” first-quarter 2026 investor letter. A copy of the letter can be downloaded here. During the first quarter, the U.S. equity market declined, with the S&P 500 Index falling by 4.33%. The fixed-income sector also saw a downturn; the Bloomberg U.S. Aggregate Bond Index fell by 0.05%. In the quarter, the Fund (Class I-2) posted a total return of -4.45%, compared to the S&P 500 Index’s -4.33% return. The Fund’s underperformance in the quarter was driven by the allocation effect, while security selection contributed positively. In this environment, the Fund continues to focus on companies experiencing secular tailwinds or robust product-driven cycles. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Aristotle Core Equity Fund highlighted Coherent Corp (NYSE:COHR) a newly added position. Coherent Corp. (NYSE:COHR) manufactures and markets engineered materials, optoelectronic components and devices, as well as laser systems used across data center, industrial, and communications applications. On May 13, 2026, Coherent Corp. (NYSE:COHR) closed at $403.71 per share. One-month return of Coherent Corp. (NYSE:COHR) was 23.08%, and its shares gained 412.19% over the past 52 weeks. Coherent Corp. (NYSE:COHR) has a market capitalization of $78.98 billion.
Aristotle Core Equity Fund stated the following regarding Coherent Corp. (NYSE:COHR) in its Q1 2026 investor letter:
“Coherent Corp. (NYSE:COHR) is a vertically integrated manufacturing company that develops, manufactures and markets lasers, transceivers, and other optical and optoelectronic devices, modules and systems, as well as engineered materials, for use in the communications, industrial, instrumentation and electronics markets. The company has broad technical expertise and a deep technology stack in areas of importance to its products, including materials growth and fabrication of specialty materials, semiconductor lasers and passive optics including isolators, transceivers, transport equipment and high-power lasers for semiconductor capital equipment, display manufacturing, precision manufacturing and scientific research. Many of Coherent’s products include custom integrated software that it develops internally, leveraging the company’s deep domain expertise.
We initiated a position in Coherent based on our view that the company sits at the nexus of a key secular growth theme in technology infrastructure, AI-driven data center buildout, with a uniquely defensible position spanning every layer of the photonics stack. Our investment thesis centers on its leadership in photonics, a sector undergoing a multi-year, structural shift from copper to optical networking driven by AI data center demands. The company stands out with unmatched vertical integration, expanding Indium Phosphide capacity and a broad global footprint that leverages geopolitical tailwinds. Additional growth is fueled by underappreciated data center interconnect demand, a massive and expanding serviceable addressable market (SAM) projected to exceed $70 billion by 2030, and strategic partnerships—most notably with NVIDIA—validating its technology leadership. Robust recurring revenues from its industrial business and proactive portfolio streamlining further support margin expansion and long-term value creation. We believe a premium valuation is justified by the company’s leverage to the AI infrastructure buildout and the resulting growth acceleration and margin expansion.”
Coherent Corp. (NYSE:COHR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 109 hedge fund portfolios held Coherent Corp. (NYSE:COHR) at the end of the fourth quarter, up from 78 in the previous quarter. In the third quarter of fiscal 2026, Coherent Corp. (NYSE:COHR) reported revenue of $1.8 billion, an increase of 7% sequentially, and 21% year-over-year, driven by growth in AI data center and communications demand. While we acknowledge the risk and potential of Coherent Corp. (NYSE:COHR) 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 Coherent Corp. (NYSE:COHR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Coherent Corp. (NYSE:COHR) and shared Artisan Mid Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 2026 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.
