HVAC: 3rd Quarter 2026 Portfolio Review
Portfolio
The AdvisorShares HVAC and Industrials ETF (HVAC) gave back a portion of its strong first-half gains in the third quarter, returning -19.05% (NAV) / -19.19% (market) in Q3 2026. That compares to a +2.30% gain for the S&P 500 Index over the same period. The pullback came as momentum in AI-infrastructure and data center construction names reversed sharply after a powerful April to June run, while a surge in Treasury yields weighed on rate-sensitive industrials.
Year to date, HVAC has returned +9.54% (NAV) / +9.62% (market), versus +12.75% for the S&P 500 Index. Since inception on February 3, 2025, HVAC has returned a strong +20.42% (NAV) / +20.46% (market) annualized, against +17.34% for the S&P 500 Index over the same period.
Portfolio
HVAC made meaningful adjustments to the portfolio during the third quarter, rotating roughly a third of its holdings and tilting toward HVAC equipment makers, distributors, and mechanical contractors.
The following new positions were added:
- Madison Air Solutions Corp. (MAIR): +24,000 shares
- EMCOR Group Inc. (EME): +800 shares
- 3M Co. (MMM): +3,600 shares
Positions were re-entered in:
- Carrier Global Corp. (CARR): +10,200 shares
- Celestica Inc. (CLS): +2,700 shares
- Ferguson Enterprises Inc. (FERG): +2,700 shares
- Flowserve Corp. (FLS): +7,100 shares
The following positions were removed during the quarter:
- AAON Inc. (AAON)
- Caterpillar Inc. (CAT)
- Curtiss-Wright Corp. (CW)
- Digital Realty Trust Inc. (DLR)
- MasTec Inc. (MTZ)
- Modine Manufacturing Co. (MOD)
- Willdan Group Inc. (WLDN
We also resized several existing positions. We added to Legence Corp. (LGN), Bloom Energy Corp. (BE), Vertiv Holdings Co. (VRT), and Generac Holdings Inc. (GNRC), and trimmed Sterling Infrastructure Inc. (STRL), Trane Technologies (TT), and Jabil Inc. (JBL). Share counts for Amphenol Corp. (APH) reflect the company’s two-for-one stock split, effective September 3, 2026.
These adjustments reflect our view that the data center cooling opportunity is broadening from a handful of high-momentum names to the equipment manufacturers, distributors, and contractors that design, supply, and install thermal management systems at scale.
Winners and Losers
In a difficult quarter for AI-infrastructure-linked industrials, a handful of holdings held up relatively well, helped by more diversified end markets and steady company-specific execution:
- 3M Co. (MMM): +4.54%
- AMETEK Inc. (AME): +2.54%
At the same time, several positions detracted from returns as high-momentum data center and power names gave back part of their first-half gains:
- Sterling Infrastructure Inc. (STRL): -41.41%
- Jabil Inc. (JBL): -25.57%
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| FIX | COMFORT SYSTEMS USA INC | 7.42% |
| CLS | CELESTICA INC | 7.01% |
| APH | AMPHENOL CORP-CL A | 6.48% |
| BE | BLOOM ENERGY CORP- A | 6.42% |
| NVT | NVENT ELECTRIC PLC | 5.46% |
| VRT | VERTIV HOLDINGS CO-A | 5.22% |
| GNRC | GENERAC HOLDINGS INC | 4.76% |
| LGN | LEGENCE CORP-CL A | 4.71% |
| PWR | QUANTA SERVICES INC | 4.62% |
| BDC | BELDEN INC | 4.49% |
As of 09.30.2026. Cash is not included. Holdings are subject to change.
Please see our complete Fund holdings at advisorshares.com/etfs/hvac. The holdings details are updated each market day.
HVAC & Industrials Landscape
The macro backdrop added pressure. With the Strait of Hormuz disruption unresolved, oil climbed back toward, and briefly above $100 per barrel – keeping inflation elevated. The Federal Reserve raised rates by a quarter point on September 16th to target range 3.75%–4.00%, its first hike since 2023. The 10-year Treasury yield rose from below 4.5% to above 5.2%, its highest level in roughly two decades.³ Higher borrowing costs tend to weigh on construction activity and on the valuations of longer-duration growth names, both relevant to the fund’s holdings.
Importantly, the selloff was driven more by positioning and valuation than by a deterioration in demand. Following second-quarter earnings, Bank of America raised its estimate for 2026 hyperscaler capital spending to more than $860 billion, up roughly 80% year over year. Estimates are on a path toward $1.2 trillion in 2027, supported by a $2.3 trillion backlog of customer cloud commitments across the four largest providers.⁴ Vertiv illustrated the disconnect, beating earnings expectations and raised its full-year sales, profit, and cash flow guidance in late July while its shares fell sharply because quarterly revenue landed at the low end of its range.⁵
The broader HVAC equipment market also continued to attract capital. Madison Air Solutions, whose brands include Nortek Data Center Cooling, AprilAire, and Big Ass Fans, completed the largest U.S. IPO of 2026 in April, a sign of investor appetite for companies that cool and condition air across data center, commercial, and residential settings.⁶
Outlook
We believe the third-quarter pullback reset valuations more than it changed fundamentals. Hyperscaler spending plans moved higher, not lower, during the quarter, and the shift toward liquid and hybrid cooling as rack densities rise remains early in its adoption curve. Third-quarter earnings season in October and November will be an important test, we will be watching backlogs, order commentary, and 2027 guidance from cooling, electrical, and construction holdings for confirmation that demand remains intact.
The main risks we are monitoring are rates and energy. Should the Fed follow through on additional hikes, or should oil remain near $100, financing costs for commercial construction and data center projects could rise further and pressure sentiment toward the sector. Our third-quarter repositioning toward HVAC equipment makers, distributors, and mechanical contractors is intended to broaden the fund’s exposure beyond the most momentum-driven names, and we expect to continue making active adjustments as opportunities in data center cooling and adjacent industrial segments evolve.
Sources:
1. Morningstar. The Shifting Trends That Drove Stock Funds in Q3 2026. October 2026.
2. CNBC. One key part of the AI trade has decoupled from the rest. September 25, 2026.
3. Cerity Partners. Third Quarter 2026 Review and Fourth Quarter 2026 Economic and Market Outlook. October 2026.
4. investingLive. BofA: Hyperscaler capex now on a path toward $1.2 trillion. August 4, 2026.
5. The Motley Fool. Why Shares in This AI Infrastructure Stock Crashed. July 29, 2026.
6. Renaissance Capital. Madison Air Solutions IPO profile. April 2026.
——————————————————————-
Tune in to AdvisorShares’ AlphaNooner Show streaming live each regular weekday starting at 12:00 pm (East Coast time), where I am a guest almost every Tuesday. Find it on most major social media platforms or visit our the AdvisorShares “Events” webpage for more information.
Past Commentary
The ISM Manufacturing Index, or Purchasing Managers’ Index (PMI), is a monthly economic indicator tracking U.S. manufacturing health based on surveys of supply executives. A reading above 50 signals expansion, while below 50 indicates contraction. Often called the PMI, Manufacturing ISM Report On Business, or simply the ISM Survey, it serves as a leading indicator of GDP and market trends
The compound annual growth rate is the annual rate of return that shows how an investment grows from its beginning value to its ending value over time, assuming reinvested profits.
The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. One cannot invest directly in an index.
Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus or summary prospectus, a copy of which may be obtained by visiting www.advisorshares.com. Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.
An investment in the Fund is subject to risk, including the possible loss of principal amount invested. There is no guarantee that the Fund will achieve its investment objective.
HVAC Companies Risk. HVAC companies are subject to a variety of factors that may adversely affect their business or operations, including costs associated with environmental and other regulations, the effects of an economic slowdown, surplus capacity or technological obsolescence, industry competition, labor relations, rate caps or rate changes and other factors. Certain HVAC companies may be subject to extensive regulation by various governmental authorities. The costs of complying with governmental regulations, delays or failures to receive required regulatory approvals or the enactment of new adverse regulatory requirements may adversely affect HVAC companies. HVAC companies may also be affected by service interruption and/or legal challenges due to environmental, operational or other conditions or events, and the imposition of special tariffs and changes in tax laws, regulatory policies and accounting standards. There is also the risk that corruption may negatively affect publicly-funded infrastructure projects, especially in non-U.S. markets, resulting in work stoppage, delays and cost overruns. Other risks associated with HVAC companies include uncertainties resulting from such companies’ diversification into new domestic and international businesses, as well as agreements by any such companies linking future rate increases to inflation or other factors not directly related to the actual operating profits of the enterprise. HVAC companies also can be significantly affected by the national, regional and local real estate markets.
American Depositary Receipt Risk. ADRs have the same currency and economic risks as the underlying non-U.S. shares they represent. They are affected by the risks associated with non-U.S. securities, such as changes in political or economic conditions of other countries, changes in the exchange rates of, or exchange control regulations associated with, foreign currencies, and differing accounting, auditing, financial reporting, and legal standards and practices. In addition, investments in ADRs may be less liquid than the underlying securities in their primary trading market.
Equity Risk. The prices of equity securities rise and fall daily. These price movements may result from factors affecting individual issuers, industries or the securities market as a whole. In addition, equity markets tend to move in cycles, which may cause stock prices to fall over short or extended periods of time.
Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times.
Holdings and allocations are subject to risks and to change.
The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.