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The US presidential election is tomorrow (5 November), and lots of buyers are speculating over how the inventory market may be affected. Will it go up or down?
As a long-term investor, nonetheless, I’m much less bothered about short-term market swings. My major objective is to construct wealth for retirement by capitalising on long-term progress alternatives.
No matter who wins the race, I’d really feel comfy scooping up shares of Ashtead Group (LSE: AHT) to carry for the subsequent few years. Right here’s why.
Very engaging returns
Ashtead proves that you just don’t need to be a horny AI-fuelled tech inventory to drive jaw-dropping returns. Working primarily below the Sunbelt Leases model, the agency rents out building and industrial tools (diggers, forklifts, excavators, scaffolding, site visitors cones and extra). Hardly spine-tingling stuff.
But the inventory is up round 7,200% in 15 years, and 145% over the previous 5 years. Neither determine features a quickly rising dividend. This makes it one of many UK’s best-performing shares during the last 20 years.
Acquisition grasp
How has Ashtead achieved this? Properly, the agency has a protracted historical past of efficiently making strategic acquisitions to develop its market presence and repair choices, attaining economies of scale alongside the way in which. This makes it a traditional instance of a serial acquirer.
Right now, it’s the second-largest rental tools supplier in North America (behind United Leases). It has an 11% market share within the US and 9% in Canada. In the meantime, it leads the UK market, with a ten% share.
In the important thing US market, many of the trade stays divided amongst smaller gamers, with 62% managed by firms exterior the ten largest corporations. This means that the market remains to be extremely fragmented and ripe for additional consolidation.
On prime of this, there’s an ongoing development towards leasing over possession, which means this can be a rising trade.
Nonetheless progressing
In its Q1 2024/25 outcomes, Ashtead mentioned it had invested $855m so as to add a complete of 33 new places in North America, as effectively finishing up two bolt-on acquisitions for $53m.
Income elevated 2% 12 months on 12 months to $2.75bn, with rental income up 7%. EBITDA rose 5% to $1.28bn.
For the complete 12 months, Ashtead expects rental income progress of 5%-8%. So the corporate is making progress, regardless of weaker building spend resulting from greater rates of interest.
US mega-projects
In 2022, the US handed the $52bn CHIPS and Science Act, designed to spice up semiconductor manufacturing, and the $891bn Inflation Discount Act, which is concentrated on rising clear power manufacturing and different sustainability initiatives.
If he wins although, Trump has promised to rescind any unspent funds below the Inflation Discount Act (which he’s referred to as the “Green New Scam”). So this can be a potential threat to progress.
Nonetheless, I’d nonetheless count on Trump to decide to onshoring manufacturing exercise, notably chip making, in addition to infrastructure spending. And because of the AI growth, building of extra information centres appears sure.
On the Q1 earnings name, Ashtead’s administration put the general quantity of mega-project worth at $850bn over 600 tasks. So this stays a really important progress alternative within the years forward, whatever the election consequence.
The inventory’s ahead price-to-earnings ratio is 16.8, slightly below that of rival United Leases (17). Given this cheap valuation, I’d snap up Ashtead shares for the lengthy haul, if I hadn’t already executed so.
