Watsco (WSO) Reported Mixed Performance in Q3

Qualivian Investment Partners, an investment partnership focused on long-only public equities, released its Q3 2025 investor letter. A copy of the letter can be downloaded here. The fund outperformed the iShares MSCI USA Quality Factor ETF (QUAL) by 69.2% and 61.3% on a gross and net basis, since inception through September 30, 2025. It also exceeded the S&P 500 by 32.7% and 26.1% respectively, on a gross and net basis. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Qualivian Investment Partners highlighted stocks such as Watsco, Inc. (NYSE:WSO). Watsco, Inc. (NYSE:WSO) engages in the distribution of air conditioning, heating, and refrigeration equipment, and related parts and supplies. The one-month return for Watsco, Inc. (NYSE:WSO) was 1.01%, and its shares lost 29.63% over the last 52 weeks. On December 23, 2025, Watsco, Inc. (NYSE:WSO) stock closed at $345.76 per share, with a market capitalization of $14.062 billion.

Qualivian Investment Partners stated the following regarding Watsco, Inc. (NYSE:WSO) in its third quarter 2025 investor letter:

"Our bottom 3 contributors in the quarter were Brown and Brown, Watsco, Inc. (NYSE:WSO), and Moody’s Corp. Watsco's Q3 2025 results showed a mixed performance, with revenue and EPS missing analysts’ estimates (declining 4% and 6% year-over-year, respectively) due to challenging market conditions and lower equipment unit volumes. Positively, the company achieved record gross profit margin of 27.5% due to pricing gains, and record operating cash flow of $355 million while maintaining a debt-free balance sheet. Management noted that the substantial, one-time costs associated with the industry's complex A2L refrigerant transition were now largely complete, setting the stage for anticipated efficiency improvements in 2026. They also indicated the company will be hosting an Investor Day on Dec. 13 to highlight key growth initiatives the company is undertaking to reaccelerate growth in 2026."

Watsco, Inc. (NYSE:WSO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 34 hedge fund portfolios held Watsco, Inc. (NYSE:WSO) at the end of the third quarter, the same as in the previous quarter. While we acknowledge the potential of Watsco, Inc. (NYSE:WSO) 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 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.