Madison Investments, an investment advisor, released its fourth-quarter 2025 investor letter for “Madison Small Cap Fund”. A copy of the letter can be downloaded here. The fourth quarter was challenging for the fund and continued to underperform its benchmark, the Russell 2000 Index. The fund (Class I) returned -0.4%, lagging the benchmark’s 2.2% return. Sector allocation negatively impacted the Fund’s performance this quarter, with healthcare being the weakest sector. The Fund remains optimistic that the speculative market is losing momentum, but cautious, given the saying “markets can stay irrational longer than you can stay solvent”. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its fourth-quarter 2025 investor letter, Madison Small Cap Fund highlighted stocks like AAON, Inc. (NASDAQ:AAON). AAON, Inc. (NASDAQ:AAON) designs and manufactures high-efficiency air conditioning and heating equipment. On March 12, 2026, AAON, Inc. (NASDAQ:AAON) stock closed at $87.06 per share. One-month return of AAON, Inc. (NASDAQ:AAON) was -13.43%, and its shares gained 6.50% over the past twelve months. AAON, Inc. (NASDAQ:AAON) has a market capitalization of $8.35 billion.
Madison Small Cap Fund stated the following regarding AAON, Inc. (NASDAQ:AAON) in its fourth quarter 2025 investor letter:
“AAON, Inc. (NASDAQ:AAON) is a provider of rooftop HVAC units for non-residential construction and climate control solutions for data centers. The company is known for its high-quality custom and semi-custom solutions and is strong in the hospital, education, and data center end markets. The company’s legacy HVAC solutions are augmented by the 2021 acquisition of BASX, which is well-positioned in data center cooling. We like the timing of this investment, as the company’s core business has been somewhat challenged in 2025 due to an EPA-required refrigerant changeover that disrupted sales and a necessary but painful enterprise resource planning (ERP) rollout that delayed lead times. Nonetheless, we believe AAON has a strong brand in rooftop HVAC and has gained market share in this space over the past 10 years. We think 2026 will be better for legacy AAON. Additionally, the BASX data center cooling business is accelerating rapidly, and we believe it will scale to >$1B in revenue, driving accelerated earnings growth. We estimate intrinsic value at $114, implying that the stock is currently trading at about a 23% discount.”
AAON, Inc. (NASDAQ:AAON) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 36 hedge fund portfolios held AAON, Inc. (NASDAQ:AAON) at the end of the fourth quarter, up from 29 in the previous quarter. Q4 2025 results show AAON, Inc. (NASDAQ:AAON) generated $424.2 million in revenue, representing 42.5% growth year over year. While we acknowledge the risk and potential of AAON, Inc. (NASDAQ:AAON) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than AAON, Inc. (NASDAQ:AAON) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered AAON, Inc. (NASDAQ:AAON) and shared a list of high-growth industrial stocks to buy. In addition, please check out our hedge fund investor letters Q4 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.
