TCW funds, a prominent investment management company, recently released its investor letter for the third quarter of 2025, focusing on its “TCW Concentrated Large Cap Growth Fund.” The letter highlighted the performance of the fund amidst a backdrop of optimism surrounding AI investments and positive corporate earnings. Despite a challenging market environment, the fund managed to achieve a return of +4.11% in the quarter, albeit lagging behind the benchmark Russell 1000 Growth Index, which posted a return of +10.51%.
One of the top holdings of the TCW Concentrated Large Cap Growth Fund mentioned in the investor letter is Eaton Corporation plc (NYSE:ETN). Eaton Corporation plc is a global power management company with a diverse portfolio of products catering to various industries such as data centers, utilities, aerospace, and mobility markets. The company has undergone a transformation from a cyclical industrial conglomerate to a more focused and higher-growth entity, positioning itself well in key markets like electronification, AI data center buildouts, and reshoring initiatives. With a market capitalization of $126.005 billion, Eaton Corporation plc closed at $323.67 per share on December 24, 2025.
The investor letter elaborated on Eaton Corporation plc, emphasizing its strategic positioning in key growth areas and its ability to generate long-term cash flows. The company’s strong backlog of multi-year megaprojects and its exposure to secular tailwinds make it an attractive investment opportunity, according to TCW. Despite its positive outlook on Eaton Corporation plc, the fund acknowledged that there are other AI stocks with potentially higher upside and lower downside risk.
In terms of hedge fund interest, Eaton Corporation plc was held by 72 hedge fund portfolios at the end of the third quarter, indicating a slight decrease from the previous quarter. The company reported quarterly earnings of $7 billion for Q3 2025, accompanied by a 70 basis points increase in margins to 25%. While Eaton Corporation plc presents investment potential, TCW believes that certain AI stocks offer more compelling opportunities in the current market environment.
For investors seeking exposure to undervalued AI stocks with significant growth potential, TCW recommends exploring their free report on the best short-term AI stock. By leveraging insights from their investor letter and market analysis, investors can make informed decisions on their investment strategies in the dynamic landscape of the financial markets.
