In a market landscape dominated by the relentless surge of artificial intelligence stocks, Giverny Capital Asset Management is looking toward a decidedly more tangible sector for its next significant play. The firm recently disclosed a new 3.5% portfolio position in Watsco, Inc. (WSO), the nation’s foremost distributor of heating, ventilation, and air conditioning (HVAC) systems. This strategic allocation arrives on the heels of a challenging period for Giverny, which saw its performance trail the S&P 500 during the fourth quarter of 2025 and for the year as a whole. The firm’s management has directly attributed this underperformance to its conservative, underweight stance on the large technology stocks that have captured the market’s imagination. While many investors have been chasing the explosive growth promised by AI, Giverny is doubling down on its philosophy of backing smaller, niche industry leaders with a proven track record of strong and consistent earnings growth, a category where they believe Watsco firmly belongs.
A Contrarian Play in a Tech Heavy Market
Watsco stands as a behemoth in its industry, holding the title of the country’s largest HVAC distributor and maintaining crucial relationships with manufacturing titans such as Carrier, Rheem, and Daikin. This entrenched market position provides a level of stability and predictable demand that contrasts sharply with the high-volatility world of emerging technology. As of January 30, 2026, the company’s stock closed at $386.45 per share, commanding a substantial market capitalization of $15.72 billion. However, the investment is not without its own recent turbulence; the stock has demonstrated significant volatility, posting an impressive 9.51% gain over the past month while simultaneously showing a concerning 19.05% loss over the last three-month period. This fluctuation underscores the dynamic nature of even established industrial markets. Giverny’s investment, therefore, represents a calculated bet that the long-term, fundamental value of Watsco’s distribution network will outweigh short-term market choppiness and the siren song of the tech sector’s meteoric rise.
Market Sentiment and an AI Alternative
The broader investment community’s perspective on Watsco added another layer of complexity to Giverny’s decision. While interest from hedge funds in the HVAC distributor remained stable, the company was not widely considered a top-tier holding among these influential institutional investors, suggesting a level of market skepticism or at least a lack of fervent enthusiasm. This lukewarm reception stood in stark contrast to the fervor surrounding AI-related equities. In fact, a competing analysis circulating among investors posited that select AI-focused stocks continued to present a more compelling risk-reward profile than a mature industrial leader like Watsco. Giverny’s move, therefore, was not just an investment in a specific company but a clear philosophical statement. The firm chose to back a well-established, profitable business in a fundamental industry, deliberately diverging from the prevailing market narrative that championed futuristic, high-growth technology above all else. This strategic pivot highlighted a fundamental split in investment ideology that defined the market at the time.
