Ariel Investments, an investment management company, released its “Ariel Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter was a volatile period. Stocks fell sharply in early April following the “Liberation Day” tariff announcement, pushing the market close to bear market territory. Later, the pause in plans led to a strong recovery. Excitement for artificial intelligence (AI) stocks reignited, with positive economic data and strong corporate earnings driving U.S. indices to new all-time highs. Growth stocks outperformed value stocks, and large caps continued to outperform their small-cap counterparts. Against this backdrop, Ariel Fund returned 6.96% in the quarter, lagging behind both the Russell 2500 Value Index’s +7.29% return and exceeding the Russell 2000 Value Index’s +4.97% gain. For more information on the fund’s top picks in 2025, please check its top five holdings.
In its second quarter 2025 investor letter, Ariel Fund highlighted stocks such as Leslie’s, Inc. (NASDAQ:LESL). Leslie’s, Inc. (NASDAQ:LESL) is a direct-to-consumer pool and spa care brand. The one-month return of Leslie’s, Inc. (NASDAQ:LESL) was -14.61%, and its shares lost 86.52% of their value over the last 52 weeks. On July 18, 2025, Leslie’s, Inc. (NASDAQ:LESL) stock closed at $0.3963 per share, with a market capitalization of $73.483 million.
Ariel Fund stated the following regarding Leslie’s, Inc. (NASDAQ:LESL) in its second quarter 2025 investor letter:
“Lastly, U.S. direct-to-consumer pool and spa care services company, Leslie’s, Inc. (NASDAQ:LESL) continued to weigh on performance over the period. The company has had a slow start to the year as adverse weather conditions resulted in softer top-line results. As the company heads into the summer pool season, the new executive leadership team is re evaluating pricing, optimizing inventory and implementing customer loyalty programs. Although investors remain on the sidelines, these initiatives should yield efficiency improvements. While we have been deeply disappointed with this investment, we are optimistic the new efforts will positively impact the business and position the company for future success. In our view, Leslie’s current valuation reflects extreme pessimism, which is unwarranted given the company’s loyal client base, vertically integrated supply chain, scale advantage and seamless customer experience.”
A close-up of a pool with freshly applied chemicals, showing the efficacy of the company’s products.
Leslie’s, Inc. (NASDAQ:LESL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 23 hedge fund portfolios held Leslie’s, Inc. (NASDAQ:LESL) at the end of the first quarter, compared to 29 in the previous quarter. In the second quarter of 2025, Leslie’s, Inc. (NASDAQ:LESL) reported sales of $177.1 million compared to $188.7 million in the second quarter of the previous year, primarily due to weaker foot traffic. While we acknowledge the potential of Leslie’s, Inc. (NASDAQ:LESL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
