Watsco (WSO): Temporary Industry Lull Overshadows Digitization Advantage Soumya Eswaran Tue, October 13, 2026 at 9:34 AM EDT 3 min read WSO -1.31% ^GSPC +0.00% Trade Watsco on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Heartland Advisors, an investment management company, released its third-quarter 2026 investor letter for "Heartland Mid Cap Value Fund". The letter can be downloaded here. Q3 proved challenging for markets as AI trade momentum faltered amid interest-rate and oil-price volatility. Following double-digit Q2 gains, the Russell Midcap Index fell 1.98%, trailing the S&P 500's 2.30% gain. Despite debt concerns and market froth, nearly $1 trillion in tech AI CapEx is projected to boost GDP by 3% and drive 2026 earnings growth. Against this backdrop, the Mid Cap Value Fund fell 4.77% due to drag from Tech and Health Care; management remains anchored in fundamental research, balance sheet strength, and long-term AI infrastructure tailwinds. Also, check the strategy's top five holdings to see its best picks in 2026.
In its Q3 2026 investor letter, Heartland Mid Cap Value Fund cited Watsco, Inc. (NYSE:WSO) as its biggest detractor during the quarter. Headquartered in Miami, Florida, Watsco, Inc. (NYSE:WSO) is a leading distributor of air conditioning, heating, and refrigeration equipment, and related parts and supplies. On October 12, 2026, Watsco, Inc. (NYSE:WSO) closed at $286.32, with an $11.82 billion market capitalization. Watsco, Inc. (NYSE:WSO) posted a ~15.03% YTD pullback, trading within a 52-week range of $277.34 to $459.00.
Heartland Mid Cap Value Fund stated the following regarding Watsco, Inc. (NYSE:WSO) in its Q3 2026 investor letter:
"Industrials. Sometimes, opportunities can be found inside your existing portfolio—if you have the patience to find out. Case in point: Watsco, Inc. (NYSE:WSO) the largest wholesale distributor of HVAC and refrigeration equipment in the U.S., which was the biggest detractor to our Fund's performance in the quarter.
The residential HVAC industry is going through a demand lull created by a combination of factors including declining new construction activity, weakening consumer financial conditions, and a pull-forward of demand caused by a refrigerant change in 2025. Watsco and the major residential HVAC equipment manufacturers underperformed following disappointing Q2 earnings results, characterized by persistent demand weakness and margin pressure associated with a lack of volume growth and tariff-induced cost volatility..." (Click here to read the full text)
Watsco, Inc. (NYSE:WSO) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held Watsco, Inc. (NYSE:WSO) at the end of the second quarter, which was 34 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 another article, we discussed Watsco, Inc. (NYSE:WSO) and shared a list of best industrial distribution stocks to invest in according to hedge funds. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.
This article is originally published at Insider Monkey.
