Wasatch Global Investors, a prominent asset management firm known for its focus on small-cap stocks, released its investor letter for the first quarter of 2025 regarding the performance of the Wasatch Small Cap Growth Strategy. Investors can access the complete letter through their official website, providing insights into the strategy's current standing and investment outlook.

During this quarter, U.S. stocks experienced a notable downturn as investors grappled with the looming ramifications of potential economic tariffs and anticipated government funding cuts. Compounding these concerns were softer-than-expected economic data, contributing to a challenging investment environment. The Russell 2000 Growth index, which tracks the performance of small-cap growth stocks, concluded the quarter with a significant loss of -11.12%. This decline also affected the Wasatch Small Cap Growth strategy, which not only fell short of the benchmark but also saw a decrease in its own returns.

In its detailed analysis, the Wasatch Small Cap Growth Strategy highlighted several key stocks, including RBC Bearings Incorporated (NYSE:RBC). Based in Oxford, Connecticut, RBC Bearings is recognized for manufacturing engineered precision bearings and related components used in various industries including aerospace and defense. Over the past month, RBC Bearings witnessed a decline in its stock price of -3.56%. However, when viewed over the past year, the company's shares have shown impressive growth, appreciating by 32.49%. As of April 17, 2025, RBC Bearings stock closed at $321.68 per share with a substantial market capitalization of $10.115 billion.

In the investor letter, Wasatch Small Cap Growth Strategy offered a positive assessment of RBC Bearings, emphasizing its strong financial performance and consistent growth within its aerospace and defense sectors. The letter stated:

Like our other top contributors, strong financial results have driven RBCs stock higher, as the company reported steady growth for its aerospace and defense business. RBC sells highly engineered precision bearings and components to the industrial, defense, and aerospace industries. We think its management team continues to execute at a high level and has done an excellent job integrating a fairly recent acquisition. We continue to like the company and believe investors underappreciate RBCs large, diversified aerospace business, especially given the strong worldwide growth in commercial aviation fleets.

While RBC Bearings Incorporated has shown potential, it's noteworthy that it did not make the list of the 30 most popular stocks among hedge funds. According to data from Wasatch, 22 hedge fund portfolios held positions in RBC Bearings by the end of the fourth quarter of 2024, a slight decrease from 26 in the preceding quarter. In the third quarter of fiscal year 2025, the company reported net sales of $394 million, reflecting a 5.5% increase compared to the previous year.

Despite acknowledging RBC Bearings investment potential, the analysts at Wasatch expressed a stronger conviction in the promise of AI stocks, noting that they may offer higher returns within a shorter timeframe. Investors seeking opportunities in the AI sector were encouraged to check out their report on the most promising AI stocks, particularly those trading at attractive valuations, such as those comparable to NVIDIA, yet offering lower price-to-earnings ratios.