What Makes AAON (AAON) an Investment Bet?

Giverny Capital Asset Management, LLC, an investment management company, recently published its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The portfolio returned -3.39% in the quarter, compared to a -4.27% return for the S&P 500 Total Return Index. For the year ended March 31, 2025, the fund returned 1.75% compared to an 8.25% return for the Index during the same period. For more information on the fund’s best picks in 2025, please check its top five holdings.

In its first-quarter 2025 investor letter, Giverny Capital Asset Management highlighted stocks such as AAON, Inc. (NASDAQ:AAON). AAON, Inc. (NASDAQ:AAON), with a market capitalization of $6.705 billion, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment. The one-month return of AAON, Inc. (NASDAQ:AAON) was -3.83%, and its shares lost 3.26% of their value over the last 52 weeks. On April 17, 2025, AAON, Inc. (NASDAQ:AAON) stock closed at $82.46 per share.

Giverny Capital Asset Management stated the following regarding AAON, Inc. (NASDAQ:AAON) in its Q1 2025 investor letter:

"In March, we built a position AAON, Inc. (NASDAQ:AAON), an Oklahoma-based manufacturer of semi-custom heating, ventilation and air conditioning (HVAC) systems for commercial buildings. We’ve been following Aaon for some time, and pounced after an earnings miss caused the stock to plunge.

Aaon’s HVAC solutions are popular with schools, shopping centers and other commercial customers with demanding air conditioning needs. Aaon equipment is configurable, whereas most of the giant HVAC brands like Carrier, Lennox and Trane mass-produce units. Historically, Aaon’s semi-custom units cost about 20% more than mass-produced units, but deliver lower energy bills over their lifetime. A significant regulatory change mandating the use of more energy-efficient refrigerant came into effect at the end of 2024. Aaon says it benefited from the rule changes and can now produce HVAC systems for only 5%-10% more than standard units. Narrowing the price gap for new equipment should help it accelerate growth from already high levels: earnings per share tripled from 2019 through 2024.

Aaon also has a large division that supplies specialized liquid cooling solutions to data centers, where millions of dollars of computer chips cannot overheat for even a minute. This division, BASX, has an enormous backlog and should grow for years. Our basis in the stock is a little over $79 per share."

AAON, Inc. (NASDAQ:AAON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held AAON, Inc. (NASDAQ:AAON) at the end of the fourth quarter which was 18 in the previous quarter. While we acknowledge the potential of AAON, Inc. (NASDAQ:AAON) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we covered AAON, Inc. (NASDAQ:AAON) and discussed the decline of construction stocks in 2025, outlining the key reasons behind their plunge. In addition, please check out our hedge fund investor letters Q1 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.