What Makes Forgent Power Solutions (FPS) a Bullish Bet?

What Makes Forgent Power Solutions (FPS) a Bullish Bet?

Fri, July 31, 2026 at 5:32 PM GMT+3 4 min read

Spyglass Capital Management LLC, an investment management firm, released its second-quarter investor letter for "Spyglass Growth Strategy". A copy of the letter can be downloaded here. Spyglass Growth Strategy appreciated 24.63% in the second quarter, significantly outperforming the Bloomberg Midcap Growth Index's 14.05% increase, the Bloomberg 2500 Growth Index's 19.01% gain, and the Bloomberg 500 Index's 15.61% return for the same period. The Strategy's performance in Q2 was a reversal from Q2 driven by easing geopolitical tensions, notably a US-Iran ceasefire, declining oil prices, and a rebound in software stocks after early-year volatility. Small caps and growth stocks outperformed, with Technology, Industrials, and Financials leading sectors. The portfolio's earnings growth remains above 40%, while current valuations do not yet reflect this performance. Despite recent portfolio success—85% of companies exceeding revenue estimates—the overall portfolio faces multiple compression with a slight negative year-to-date return. However, the firm remains confident that fundamentals will prevail over volatility, emphasizing that the market's short-term inefficiencies may present opportunities for value extraction. In addition, please check the Firm's top five holdings to know its best picks in 2026.

In its Q2 2026 investor letter, the Spyglass Growth Strategy highlighted Forgent Power Solutions, Inc. (NYSE:FPS) as new portfolio addition. Forgent Power Solutions, Inc. (NYSE:FPS) is a leading industrial company that designs and manufactures electrical distribution equipment used in data centers, the power grid, and energy-intensive industrial facilities. On July 30, 2026, Forgent Power Solutions, Inc. (NYSE:FPS) closed at $33.28 per share, reflecting a market capitalization of $10.13 billion. Forgent Power Solutions, Inc. (NYSE:FPS) posted a one-month return of -28.98%.

Spyglass Growth Strategy stated the following regarding Forgent Power Solutions, Inc. (NYSE:FPS) in its Q2 2026 investor update:

"Forgent Power Solutions, Inc. (NYSE:FPS), a manufacturer of mission-critical electrical equipment, was a new position during the second quarter. Forgent designs and manufactures the electrical distribution equipment used in datacenters, power grids, and factories, including transformers, switchgear, switchboards, transfer switches, and prefabricated eHouses and power skids. The Company was assembled by energy-infrastructure specialist Neos Partners as a roll-up of four specialty manufacturers and went public on the NYSE in February 2026. As of March 31, 2026, backlog stood at $2 billion against trailing revenue of $1.2 billion, up roughly 80% year-over-year.

After 25 years of flat US electricity demand, we believe AI, reshoring, and electrification are driving a step-change in demand for electrical equipment, and we expect Forgent's addressable market to grow from $29 billion in 2025 to $75 billion by 2030. Electrical equipment is typically a small fraction of datacenter capital spending, yet nothing can be energized without it, so customers tend to optimize on availability and reliability rather than price. With Forgent having invested in capacity ahead of its peers, we calculate it can now support $5 billion of run-rate revenue, delivering lead times up to 65% faster than the market, while generating roughly 90% of revenue from engineered-to-order products versus 5-10% at legacy peers. We therefore expect the Company to grow well in excess of a market that is itself compounding at approximately 21% annually, and we are looking for free cash flow to inflect from negative $39 million in fiscal year 2025 to more than $300 million in fiscal year 2027..." (Click here to read the full text)

Forgent Power Solutions, Inc. (NYSE:FPS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 76 hedge fund portfolios held Forgent Power Solutions, Inc. (NYSE:FPS) at the end of the first quarter. While we acknowledge the potential of Forgent Power Solutions, Inc. (NYSE:FPS) 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 thebest short-term AI stock.

In another article, we covered Forgent Power Solutions, Inc. (NYSE:FPS) and shared a bullish thesis on the company. Baron Discovery Fund initiated position in Forgent Power Solutions, Inc. (NYSE:FPS) in the previous quarter due to its distinctive industry positioning. In addition, please check out our hedge fund investor letters Q2 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.