Giverny Capital Bets on HVAC Giant Watsco Amid Tech-Led Market Volatility

In a market seemingly obsessed with artificial intelligence, one investment manager is doubling down on a decidedly analog business. Giverny Capital Asset Management detailed its new position in Watsco, Inc. (NYSE: WSO), a leading distributor of HVAC and refrigeration equipment, in its recently released fourth-quarter 2025 investor letter.

The firm reported a quarterly portfolio return of just 0.01%, significantly trailing the S&P 500's 2.66% gain. For the calendar year, Giverny returned 12.58% versus the index's 17.88%. The letter attributed the relative underperformance to being underweight the "Magnificent Seven" mega-cap tech stocks, whose AI-driven rallies have disproportionately fueled broad market gains, while maintaining overweight positions in smaller, niche industry leaders.

"Our portfolio companies are executing superbly, growing earnings and returning capital to shareholders," the letter stated. "Yet the market's singular focus on AI narratives has created a disconnect between business fundamentals and stock prices in many sectors."

Enter Watsco. With a market capitalization of $15.7 billion, the company is a dominant force in the essential, but often overlooked, HVAC distribution industry. Giverny's thesis appears to hinge on Watsco's resilient business model, which benefits from non-discretionary replacement demand, regulatory pushes for energy-efficient systems, and a fragmented competitive landscape ripe for consolidation. The stock closed at $386.45 on January 30, 2026, having gained 9.51% over the past month but down 19.05% over the prior three months—a volatility that may have presented a buying opportunity for the value-focused firm.

According to Insider Monkey data, 34 hedge funds held Watsco at the end of Q3 2025, a number unchanged from the previous quarter. Notably, the stock did not rank among the 30 most popular hedge fund holdings.

Analyst & Investor Commentary:

Sarah Chen, Portfolio Manager at Oakcrest Advisors: "Giverny's move is a classic contrarian play. It's a bet on steady, predictable cash flows in a market paying a premium for hype. Watsco's moat in distribution and exposure to long-term trends like electrification and efficiency upgrades is being undervalued."

Michael Rossi, Independent Retail Investor: "Finally, some sanity! Everyone's chasing AI dreams while companies that keep our homes and businesses actually running get ignored. This is a reminder that real value investing isn't dead."

David Feld, Tech-Focused Hedge Fund Analyst: "This is precisely why active managers are struggling. While Giverny was picking HVAC distributors, the AI wave created generational wealth. They're clinging to an old-world playbook in a new-world market. That 0.01% quarterly return speaks volumes."

Rebecca Jones, Financial Advisor at ClearPath Wealth: "For clients seeking diversification away from tech concentration, ideas like Watsco are crucial. It provides cyclical growth tied to housing and commercial construction, but with defensive characteristics through maintenance and repair demand."

Disclosure: This analysis is based on publicly available documents from Giverny Capital Asset Management and is for informational purposes only. It is not investment advice.