Madison InvestmentsInvestment Advisors has issued a Q4 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 1) returned -0.4%, trailing the benchmark’s 2.2% return. Sector allocation negatively impacted the fund’s performance this quarter, with healthcare being the weakest sector. The fund is optimistic that the speculative market will lose momentum, but cautious, noting that “markets can remain irrational longer than they resolve”. Additionally, you can check the fund’s top 5 holdings to determine its top picks for 2025.
In its 4th quarter 2025 investor letter, Madison Small Cap Fund announced that AAON, Inc. (NASDAQ: AAON ) highlighted stocks like 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. AAON, Inc. (NASDAQ:AAON)’s one-month return was -13.43%, and its dividend yielded 6.50% over the past twelve months. AAON, Inc. (NASDAQ: AAON ) has a market capitalization of $8.35 billion.
Madison Small Cap Fund AAON, Inc. (NASDAQ: AAON ) said the following in its fourth quarter 2025 investor letter:
“AAON, Inc. (NASDAQ: AAON ) is a provider of rooftop HVAC units for non-residential buildings and climate control solutions for data centers. The company is known for 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 enhanced 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 by an EPA-mandated refrigerant change in 2025 that disrupted sales and a necessary but painful enterprise resource planning (ERP) rollout that delayed lead times. However, we believe that AAON has a strong brand in rooftop HVAC and has gained market share in this space over the last 10 years. We think 2026 will be the best for legacy AAON. Additionally, BASX’s data center cooling business is accelerating rapidly, and we believe it will scale to $1B in revenue, driving rapid revenue growth. We estimate an intrinsic value of $114, which means the stock is currently trading at about a 23% discount.”
AAON, Inc. (NASDAQ: AAON ) is not on our list of the 40 most popular stocks among hedge funds in 2026. According to our database, 36 hedge fund portfolios hold AAON, Inc. (NASDAQ: AAON ) at the end of the fourth quarter, up from the previous 29 quarters. Q4 2025 results show that AAON, Inc. (NASDAQ: AAON ) generated $424.2 million in revenue, representing 42.5% year-over-year growth. While we at AAON, Inc. (NASDAQ: AAON ) potential as an investment, we believe some AI stocks offer high potential and low risk. If you’re looking for the most undervalued AI stocks that stand to benefit significantly from Trump-era tariffs and the offshore trend, check out our free report Best short-term AI stocks.
