Here’s Why Regal Rexnord Corporation (RRX) Fell in Q1

Diamond Hill Capital, an investment management company, released its “Large Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. Markets exhibited a mixed performance in Q1 as the new presidential administration generated significant buzz with a flurry of actions, leaving investors uncertain about the future direction. The portfolio trailed the Russell 1000 Value Index benchmark in Q1. The strategy returned 1.36% (net) vs 2.14% returns for the index. To get an idea of the fund’s best choices for 2025, check out its top 5 positions.

In its first-quarter 2025 investor letter, Diamond Hill Large Cap Fund highlighted stocks such as Regal Rexnord Corporation (NYSE:RRX). Regal Rexnord Corporation (NYSE:RRX) is a global manufacturer of industrial powertrain solutions, power transmission components, electric motors and electronic controls, air-moving products, and specialty electrical components and systems.  The one-month return of Regal Rexnord Corporation (NYSE:RRX) was 33.59%, and its shares lost 17.29% of their value over the last 52 weeks. On May 9, 2025, Regal Rexnord Corporation (NYSE:RRX) stock closed at $134.22 per share with a market capitalization of $8.904 billion.

Diamond Hill Large Cap Fund stated the following regarding Regal Rexnord Corporation (NYSE:RRX) in its Q1 2025 investor letter:

“Among our bottom Q1 individual contributors were Regal Rexnord Corporation (NYSE:RRX) and Target. Power transmission components manufacturer Regal Rexnord faced pressure amid growing tariff-related concerns. Generally, its organic growth has held up better than peers’, and though its leverage is somewhat elevated, merger synergies and debt paydown rates are beating expectations — factors which should position it well relative to competitors. We believe the recent weakness has been an overreaction and maintain our conviction in our thesis.”

A technician inspecting a specialized industrial machinery in an engineering lab.

Regal Rexnord Corporation (NYSE:RRX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held Regal Rexnord Corporation (NYSE:RRX) at the end of the fourth quarter which was 30 in the previous quarter. Regal Rexnord Corporation’s (NYSE:RRX) organic sales increased by 0.7% year-over-year basis (see the details here). While we acknowledge the potential of Regal Rexnord Corporation (NYSE:RRX) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.