HVAC: 3rd Quarter 2025 Portfolio Review
Portfolio
Performance
Launched on February 3, 2025, HVAC closed its second full quarter on another strong note. In Q3 2025, the fund rose 10.55% (NAV) | 10.57% (market), outperforming the S&P 500 Index, which gained 8.12% over the same period.
Portfolio
Throughout the quarter, HVAC made targeted adjustments to navigate the shifting economic and policy backdrop. New positions were added to capture emerging opportunities:
- API Group Corp. (APG): 2,672 shares
- Gates Industrial Corp. (GTES): 4,700 shares
- Veralto Corp. (VLTO): 1,336 shares
Reentered:
- Graham Corp. (GHM): 3,000 shares
- Johnson Controls International (JCI): 1,010 shares
At the same time, the fund exited certain positions to refine its exposure and reduce sensitivity to ongoing tariff and supply chain challenges:
- Azek Co. Inc. (AZEK)
- Carlisle Inc. (CSL)
- Dover Corp. (DOV)
- Middleby Corp. (MIDD)
The portfolio remains tactically positioned, emphasizing companies with robust supply chains and lower vulnerability to tariff-related input costs, while maintaining flexibility to adapt to macroeconomic developments.
Winners and Losers
Several holdings stood out as strong contributors to performance for the quarter, benefiting from both favorable market conditions and company-specific strengths:
- Comfort Systems USA Inc. (FIX): up 54.00%
- Amphenol Corp. (APH): up 25.49%
- The AES Corp. (AES): up 26.76%
On the other hand, only a few names were adversely affected by lingering tariff uncertainty and broader market weakness during the quarter:
- Limbach Holdings Inc. (LMB): down -30.68%
- Carrier Global Corp. (CARR): down -18.19%
- Lennox International Inc. (LII): down -7.43%
Top Holdings
| Ticker | Security Description | Portfolio Weight % |
| FIX | COMFORT SYSTEMS USA INC | 8.45% |
| APH | AMPHENOL CORP-CL A | 8.35% |
| VRT | VERTIV HOLDINGS CO-A | 5.87% |
| GHM | GRAHAM CORP | 5.35% |
| WLDN | WILLDAN GROUP INC | 4.70% |
| VLTO | VERALTO CORP | 4.63% |
| ETN | EATON CORP PLC | 4.46% |
| TT | TRANE TECHNOLOGIES PLC | 4.32% |
| GEV | GE VERNOVA INC | 4.28% |
| AES | AES CORP | 4.11% |
As of 09.30.2025. 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
In Q3 2025, the HVAC investment landscape demonstrated resilience and growth potential amid broader economic uncertainty. Expansion was fueled by advancements in energy-efficient technologies, decarbonization initiatives, and sustained demand from urbanization and commercial construction.
The global HVAC systems market, valued at approximately US $243.44 billion in 2024, is projected to grow at a 6.87% compound annual growth rate, reaching US $442.68 billion by 2033. Key growth drivers include smart IoT integrations, artificial-intelligence-based predictive maintenance, and adoption of low-GWP refrigerants under policies such as the AIM Act.¹
Investment activity remained healthy—particularly in M&A, where strategic acquirers led transactions targeting sustainable and scalable solutions. However, residential sales softened due to macroeconomic pressure. Heat pumps continued to dominate decarbonization trends, outselling fossil-fuel furnaces by roughly 26% through July 2025, extending a lead established in 2022 and underscoring the global shift toward electrification.²
Urbanization added further momentum: more than 4 billion people now live in urban areas, a figure projected to reach 70% of the global population by 2050, driving HVAC installations across residential, commercial, and industrial markets.¹
Commercial HVAC maintained strong growth projections, while residential manufacturers forecasted muted year-end performance amid high interest rates, inventory buildup, and slowing economic activity.
Technological progress continued to shape the sector. Innovations such as variable-speed compressors, modular systems, and AI-powered automation gained traction, with emerging economies in Asia-Pacific and the Middle East leading construction-related growth.³
Decarbonization policies also advanced. Fifteen “Future of Gas” proceedings were active across 13 states and D.C., including Maryland’s Q3 initiative promoting emission reductions and non-pipeline alternatives (NPAs). Thermal Energy Networks (TENs) gained visibility through 26 utility pilots demonstrating up to six-times higher efficiency than gas furnaces and lifecycle savings of US $8 million – US $75 million compared with air-source heat pumps.³
The HVAC sector is positioned for sustained expansion through 2034, driven by green-refrigerant adoption, smart integrations, and neighborhood-scale decarbonization such as TENs. Policy developments in California, Colorado, and other states could accelerate the transition by 2026.
Investment opportunities center on energy-efficient innovations, AI-driven systems, and consolidation through M&A, though challenges remain—namely high installation costs, regulatory complexity, and residential-market weakness.
Global projections reinforce long-term viability, particularly in emerging markets and sustainable technologies, suggesting potential for outperformance even as the residential segment cools, supported by commercial and industrial diversification.
Sources:
1 GlobalNewswire. HVAC Systems Industry Research Report 2025-2033, Competitive Analysis of Carrier, Daikin Industries, Fujitsu, Haier, Honeywell International, Panasonic, LG, Lennox International, Mitsubishi, Bosch. October 2025.
2 BDC. Mometum Q3 2025. October 2025.
3 FiedlEx. Liu, Sophia. Top 21 HVAC Industry Trends and Innovations to Watch in 2025. July 2025.
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Definitions:
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.