What Makes AAON (AAON) an Investment Choice?

Baron Funds, an investment management company, released its “Baron Real Estate Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund delivered strong results in the quarter. The fund appreciated 10.25% (Institutional Shares) compared to the MSCI US REIT Index’s (the REIT Index) 4.49% and the MSCI USA IMI Extended Real Estate Index’s 5.65%. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Baron Real Estate Fund highlighted stocks such as AAON, Inc. (NASDAQ:AAON). AAON, Inc. (NASDAQ:AAON), with a market capitalization of $8.482 billion, engages in engineering, manufacturing, marketing, and distribution of air conditioning and heating equipment. The one-month return of AAON, Inc. (NASDAQ:AAON) was -0.35%, and its shares lost 22.83% of their value over the last 52 weeks. On November 11, 2025, AAON, Inc. (NASDAQ:AAON) stock closed at $103.90 per share.

Baron Real Estate Fund stated the following regarding AAON, Inc. (NASDAQ:AAON) in its third quarter 2025 investor letter:

"Following a 40% decline from its peak share price earlier in 2025, we began purchasing shares of AAON, Inc. (NASDAQ:AAON), a differentiated, best in-class provider of premium HVAC products, targeting the North American light commercial market, and data center cooling solutions through its BASX subsidiary. We believe the sharp decline in AAON’s share price was caused by an overreaction to the company’s Investor Day guidance and a temporary hiccup due to a new Enterprise Resource Planning implementation in the second quarter.

AAON’s core HVAC business (around 80% of 2024 sales) is a leader in providing premium, semi-custom HVAC equipment with products that are more energy efficient, have longer life spans, and overall are better customized than peers to fit customer’s needs. This has driven significant outperformance over the past decade with organic growth in the high single-digit to low double-digit range versus low-mid single digits for peers. BASX (20% of 2024 sales) has distinguished itself with its ability to customize specific cooling solutions for hyperscalers and the most demanding customers that are more durable and energy efficient, very similar to the promise of the core AAON HVAC solution set. Over the next few years, we expect BASX to grow over 40% annually and by 2027, BASX may reach nearly 40% of AAON’s total revenue. AAON has already shown progress improving its recent production rates and given the significant demand ahead for its products has line of sight to continued market share gains across both segments for the foreseeable future."

AAON, Inc. (NASDAQ:AAON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 29 hedge fund portfolios held AAON, Inc. (NASDAQ:AAON) at the end of the second quarter, up from 18 in the previous quarter. AAON, Inc.’s (NASDAQ:AAON) net sales in the quarter third quarter increased 17.4% to $384.2 million. While we acknowledge the potential of AAON, Inc. (NASDAQ:AAON) 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.

In another article, we covered AAON, Inc. (NASDAQ:AAON) and shared Conestoga Capital Advisors' views on the company. In addition, please check out our hedge fund investor letters Q3 2025 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.